MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Question
Chapter 15, Problem 15QE
(a)
To determine
The reason for the regulation to have the effect it did.
(b)
To determine
The contestable market view of the competitive process.
(c)
To determine
The cartel view of the competitive process.
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(a) What is a monopoly, and why is it inefficient in relation to a competitive market?
Please refer to th graph attached. The graph shows the Demand, Marginal Revenue, Average Total Cost, Average variable Costs and Marginal Cost curves for a monopolist.
(a) What is the profit maximizing/ loss minimizing quantity of output and what is the maximum price the monopolist can charge?
(b) Is this monopolist making economic profit or economic loss? How do you know? Explain please.
(c) Calculate the firms profit or loss and show the economic profit/loss on the graph.
i A monopoly can be identified by a few traits that distinguish it from other market systems. Identify the reasons a monopoly firm sets prices in microeconomics.
ii. Monopolistic opponents said that the monopoly power would have a negative social impact. Tell us why.
iii Describe THREE (3) qualities or conditions of the perfectly Competitive market structure. A perfectly competitive market has the opposite characteristics or conditions from a monopolistic market.
Chapter 15 Solutions
MICROECONOMICS
Ch. 15.1 - Prob. 1QCh. 15.1 - Prob. 2QCh. 15.1 - Prob. 3QCh. 15.1 - Prob. 4QCh. 15.1 - Prob. 5QCh. 15.1 - Prob. 6QCh. 15.1 - Prob. 7QCh. 15.1 - Prob. 8QCh. 15.1 - Prob. 9QCh. 15.1 - Prob. 10Q
Ch. 15 - Prob. 1QECh. 15 - Prob. 2QECh. 15 - Prob. 3QECh. 15 - Prob. 4QECh. 15 - Prob. 5QECh. 15 - Prob. 6QECh. 15 - Prob. 7QECh. 15 - Prob. 8QECh. 15 - Prob. 9QECh. 15 - Prob. 10QECh. 15 - Prob. 11QECh. 15 - Prob. 12QECh. 15 - Prob. 13QECh. 15 - Prob. 14QECh. 15 - Prob. 15QECh. 15 - Prob. 16QECh. 15 - Prob. 17QECh. 15 - Prob. 18QECh. 15 - Prob. 1QAPCh. 15 - Prob. 2QAPCh. 15 - Prob. 3QAPCh. 15 - Prob. 4QAPCh. 15 - Prob. 5QAPCh. 15 - Prob. 1IPCh. 15 - Prob. 2IPCh. 15 - Prob. 3IPCh. 15 - Prob. 4IPCh. 15 - Prob. 5IPCh. 15 - Prob. 6IPCh. 15 - Prob. 7IP
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Similar questions
- 29. Imagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?arrow_forwardQuestion 4: The main criticism that economists have about monopolies is that a monopoly produces too little output and charges too high a price compared to a competitive market. The chart below shows a hypothetical monopoly's Marginal Cost (MC) and Marginal Revenue (MR) curves as well as the market demand (D) curve. AC MC 100 75 50 100 200 a) What is the quantity produced and price paid in this market if the monopoly seeks to maximize profits? (B) What will be the profits made by the monopoly in this situation? (C) Where do economists say would be the socially optimal level of production?| (D) instead of producing at the level that maximizes social welfare? Calculate the deadweight loss if the monopoly produces where it maximizes total profitsarrow_forwardQuestion 4 A monopoly can be recognized by certain characteristics that set it aside from the other market structures. Explain why a monopoly firm is a price-maker in i. microeconomics. The opponent of monopoly argued that the monopoly power will result to a social cost. Explain why. i. A perfectly competitive market has the opposite characteristics or conditions from the monopoly market, describe THREE (3) characteristics or conditions of the perfectly Competitive market structure. iii.arrow_forward
- 1. Suppose the local electrical company, a legal monopoly based on economies of scale, was split into four firms of equal size, with the idea that eliminating the monopoly would promote competitive pricing of electricity. What do you anticipate would happen to prices? Why? 2. Suppose a monopolist could charge a different price to every customer based on how much he or she were willing and able to pay (versus charging the same price to all their customers). How would this affect the monopolist's profits? Why?arrow_forward(Figure: Demand, Revenue, and Cost Curves for Thneeds) Use Figure: Demand, Revenue, and Cost Curves for Thneeds. Thneeds and Things is a monopolist in the thneed ("things we need") market. If the government wants to regulate Thneeds so that an efficient outcome is reached, it would impose a price ceiling of: Price of thneeds $100 90 $40. $46. $50. $65. 80 70 60 50 40 30 20 10 0 20 MR D MC ATC 60 100 140 180 220 Quantity of thneedsarrow_forwardQuestion 1a. With the aid of a diagram explain how a monopolist determines how much output to produce and what price to charge. b. Explain how the perfectly competitive firm decides whether to operate or shut down in the short run. c. Explain why firms operating in monopolistically competitive markets probably will not earn an economic profit in the long run. d. Why does interdependence of firms play a major role in oligopoly but not in perfect competition or monopolistic competition? Question 2a. A producer borrows money and starts a business. He himself looks after the business. Identify implicit and explicit costs from this information. Explain. b. List and explain which of the following is a fixed cost or a variable cost for Caribbean Airlines. i. The cost of fuel used in its planes. ii. The rent on its Piarco headquarters. iii. The lease payments on its current inventory of jets. iv. The cost of peanuts it serves to passengers. v. The salary paid to the Chief Executive Officer. c.…arrow_forward
- Solve part c) and d)arrow_forward15. The marginal benefit to suppliers will be less than the marginal cost to the single buyer. This describes A-perfect competition B-monopolistic competition C-an oligopoly D-a monopoly E-a monopsony 13 Which of the following is correct about a monopsonistic market? A-Resources are efficiently allocated. B-There is one seller and many buyers. C-The monopsony has a lower quantity transacted as in a perfectly competitive market, ceteris paribus. D-The supply curve is horizontal and is equal to the average cost of labor. E-Purchase of an additional unit decreases the price of that unit and of the existing units being purchased.arrow_forwardProblem 1. (Monopoly and Efficiency) A monopolist faces a market demand Q = 30- P, where P is the market price, and has a cost function TC = }Q², where Q is the quantity monopolist produces. (a) Find the profit maximizing price and quantity. Calculate the resulting consumer surplus (CS), producer surplus (PS) and the deadweight loss (DWL). (b) Suppose that the government puts a price ceiling at p 18. How much output will the monopolist produce? Calculate the resulting CS, PS, and DW L. Why is DWL different now? (c) Suppose that the government puts a price ceiling on the monopolist in order to maximize the total surplus (CS+ PS). What price ceiling should it choose? How much output will the monopolist produce at this price ceiling? Calculate resulting CS, PS, and DW L. Is this the socially optimal outcome?arrow_forward
- part C and Darrow_forward(a) Does a monopolistically competitive firm have an incentive to produce at the level of output that minimizes the average total cost at the long run equilibrium? Explain with a diagram. (b) Suppose CLP Holdings Limited is a natural monopolist with constant marginal cost. Draw a diagram to indicate the profit-maximizing level of output, the profit-maximizing price, and the size of the profit. If the government wants to increase the market efficiency through price regulation, would you suggest the government setting the price equal to the firm’s marginal cost or its average total cost? Explain in detail with the diagram in part (i).arrow_forward(a) What is meant by consumer surplus and producer surplus? Using a diagram show that there is a deadweight loss to society from monopoly in terms of total surplus. (b) In what ways is a monopolistically competitive firm likely to be less efficient than one under perfect competition?arrow_forward
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