The lure of the cartels.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (b):

To determine

The lure of the cartels.

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (c):

To determine

The lure of the cartels.

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (d):

To determine

The lure of the cartels.

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

A young woman plans to retire early in 25 years. She believes she can save $10,000 each year starting now. If she plans to begin withdrawing money one year after she makes her last payment into the retirement account (i.e., in the 26th year), what uniform amount could she withdraw each year for 30 years, if the account earns an interest rate of 8% per year? a) Correctly plot the cash flow diagram with its respective vectors, arrowheads, units, and currency values. b) Correct mathematical approach and development, use of compound interest factors.c) Financial logic in the development of the exercise and application of the concept of time value of money. d) Final numerical answer and writing in prose with a minimum of 20 words and a maximum of 50 words of the obtained numerical interpretation.

A hospital charges $200 for a medical procedure, and 1,000 patients use the service. The hospital raises the price to $250, and the number of patients drops to 900. Calculate the price elasticity of demand (PED) and explain your answer. (show all working) Briefly explain how elasticity affects government health policies in the following cases: • Taxes on unhealthy products (cigarettes, alcohol, sugary drinks) • Subsidizing Preventive Care (e.g., vaccines, screenings) Drug Price Controls & Generic Substitutions Co-Payments & Insurance Design

Assume the United States is a large consumer of steel, able to influence the world price. DUS and SUS denote its demand and supply schedules in Figure 1. The overall (United States plus world) supply schedule of steel is denoted by SUS.+W. Figure 1 Import Tariff Levied by a Large Country Answer all questions (a-f) by referring to Figure 1 above. a) Calculate the free trade market equilibrium price, domestic consumption, and volumE Answer all questions (a-f) by referring to Figure 1 above. a) Calculate the free trade market equilibrium price, domestic consumption, and volume of steel imports by the US. [5 marks] b) Suppose the United States imposes a tariff (t) of $100 on each ton of steel imported. With the tariff, calculate the price of steel and the volume of steel imports by the US. [5 marks] c) Of the $100 tariff, how much is passed on to the US consumer via a higher price, and how much is borne by the foreign exporter? [5 marks] d) Calculate the tariff's deadweight welfare loss to…

Answer 2

Question

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (b):

To determine

The lure of the cartels.

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (c):

To determine

The lure of the cartels.

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (d):

To determine

The lure of the cartels.

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (b):

To determine

The lure of the cartels.

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (c):

To determine

The lure of the cartels.

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (d):

To determine

The lure of the cartels.

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (b):

To determine

The lure of the cartels.

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (c):

To determine

The lure of the cartels.

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (d):

To determine

The lure of the cartels.

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (b):

To determine

The lure of the cartels.

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (c):

To determine

The lure of the cartels.

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Subpart (d):

To determine

The lure of the cartels.

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 6

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 7

Chapter 15, Problem 1FT

Subpart (a):

To determine

The lure of the cartels.

Answer 8

Subpart (a):

Expert Solution

Explanation of Solution

The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market. Price controls are government-controlled price mechanisms. The maximum and the minimum prices will be set under the price controls by the government in order to prevent overpricing and underpricing in the market, to protect the consumer’s as well as the producer’s interests.

The profit of a firm is the excess revenue left with the firm after deducting the total cost of production from the total revenue of the firm that is generated through the sale of the goods and services. Here, in the case of the firm, the case is monopoly and when the market is in a monopoly situation, the profit earned by the producer will be higher in margin. Thus, the area between the monopoly price and the competitive price multiplied with the monopoly quantity will give us the monopoly profit. It can be illustrated as follows:

Modern Principles of Economics, Chapter 15, Problem 1FT

Here, the monopoly price is higher than the competitive price; this means that the firm earns higher than the marginal cost and the average cost (which is the profit per unit). When it is multiplied with the monopoly quantity, it gives us the profit of the monopolist.

Answer 9

Subpart (a):

Expert Solution

Answer 10

Subpart (a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 13

Subpart (b):

To determine

The lure of the cartels.

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 14

Subpart (b):

To determine

The lure of the cartels.

Answer 15

Subpart (b):

Expert Solution

Explanation of Solution

When the size of the monopoly profit has to be calculated, the area can be calculated by subtracting the average cost of the firm (which is also equal to the marginal cost) and competitive price from the monopoly price, and multiplying it with the monopoly quantity. It is the area of the monopoly profit which can be explained in the following formula:

Monopoly profit=(Monopoly price−Average cost)×Monopoly quantity=(PMonopoly−AC)×QMonopoly

Answer 16

Subpart (b):

Expert Solution

Answer 17

Subpart (b):

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 20

Subpart (c):

To determine

The lure of the cartels.

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 21

Subpart (c):

To determine

The lure of the cartels.

Answer 22

Subpart (c):

Expert Solution

Explanation of Solution

It is given that the monopoly price is equal to $0.70/lb and the marginal cost of production (which is equal to the average cost of production and the competitive price) is $0.40/lb. The monopoly quantity demanded is given as 300 million lb. Thus, the monopoly profit per unit can be calculated by subtracting the average cost from the monopoly price as follows:

Monopoly profit per unit=Monopoly price−Marginal cost=0.70−0.40=0.30

Thus, the monopoly profit per unit is $0.30/lb. Similarly, the total industry profit can be calculated by multiplying the monopoly per unit profit with the total monopoly quantity demanded as follows:

Total industry profit=Per unit profit×Industry quantity demanded=0.30×300,000,000=90,000,000

Thus, the total industry profit is equal to $90,000,000.

Answer 23

Subpart (c):

Expert Solution

Answer 24

Subpart (c):

Expert Solution

Answer 25

Expert Solution

Answer 26

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 27

Subpart (d):

To determine

The lure of the cartels.

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.

Answer 28

Subpart (d):

To determine

The lure of the cartels.

Answer 29

Subpart (d):

Expert Solution

Explanation of Solution

When the monopoly market is in operation, each producer earns $0.30/lb of apples. When everything remains the same and one single producer cheats the cartel by increasing the production by 1,000,000 pounds of apples, it will increase the profit of the producer. This can be calculated by multiplying the per-unit profit with the increased quantity as follows:

Profit of the cheater=Per lb profit×Increased quantity=0.30×1,000,000=300,000

Thus, the cheating producer earns approximately $300,000 additionally, through cheating. The extra profit made is approximate because the increase in the quantity will push the prices down in the market. Since the increase in the quantity is only 1/300th of the market, the impact on the price would be lower.

Answer 30

Subpart (d):

Expert Solution

Answer 31

Subpart (d):

Expert Solution

Answer 32

Expert Solution

Answer 33

Economics Concept Introduction

Concept introduction:

Cartel: A cartel is an association or organization of suppliers or producers, which has the main intention of keeping the prices of the commodities that they produce high and reducing the competition between them.

Market: The market is a structure where there are buyers who buy and sellers who sell and there is an exchange of goods and services between them. The price is determined by the interaction of demand and supply in the market.