Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 15, Problem 1QAP
To determine
The ways in which monopolists use power to manipulate outcomes.
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A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling
to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopolized
markets and competing for customers.
Consider the market for taxi services. In order to own and operate a taxi, drivers are required to obtain a taxi medallion.
Which of the following best explains the barriers to entry that exist in this scenario?
Increasing returns to scale
Control over an important input
O Legal barriers
Many European governments are reluctant to allow online betting in an attempt to protect their national gambling businesses. A recent study found that seven countries out of the 27 in the European Union banned online gambling. Of the other 20 only 13 have opened their markets to competition; in the rest gambling is dominated by monopolies owned or licensed by the government. In the Netherlands, for example, residents can only place online bets with a state monopoly: De Lotto. The Ministry of Justice even warned banks in the country that they could be prosecuted if they transferred money to online gambling companies. Other countries have ordered online betting companies to block access to their sites. Their governments argue that this is to protect people from gambling excessively. However the revenue they gain from their own monopolies should not be ignored as a possible motive.
Questions
If governments believe that gambling is bad for their citizens then in economic terms how would…
Consider the graph below that represents the demand curve for a good, the marginal
revenue of a potential monopolist, and the marginal cost before an innovation (MC1 =
1) and after a potential innovation of size y (MC2 = 1/y).
In the initial period, all firms have the same marginal cost MC1. A single firm can
choose to try to innovate. If it is successful, it becomes a monopolist in the second
period with marginal cost MC2.
1
1/Y
Demand
Marginal revenue
MC1
MC2
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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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- What stops oligopolists from acting together as a monopolist and earning the highest possible level of profits? Offer two obstacles to oligopolists cooperating.arrow_forwardSuppose that a monopolist, who sells all units at a uniform price, faces an inverse market demand curve P=200- 4Q. If there is no cost of production, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variablesarrow_forwardOnly one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P = 10 - Q Marginal Revenue:MR = 10 - 2 Q Total Cost TC= 3 + Q+0.5 Q2 Marginal Cost: MC= 1+ Q, where Q is quantity and Pis the price measured in Wiknamian dollars. a. How many soccer balls does the monopolist produce? At what price are they sold? What is the monopolist's profit? b. One day, the King of Wiknam decrees that henceforth there will be free trade-either imports or exports of soccer balls at the world price of $6.The firm is now a price taker in a competitive market What happens to the domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls? c. In our analysis of international trade in Chapter a country becomes an exporter when the price without trade is below the…arrow_forward
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