Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 2P
To determine
The market power, and the rationale for government regulations of firms with power.
Concept Introduction:
The relative ability of a company to control the
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Explain the table
Output
(Units)
Total Revenue (£)
Total cost (£)
Profit (£)
Marginal
revenue (£)
Marginal cost (£)
Change in profit (£)
0
0
3
-3
-
-
-
1
6
5
1
6
2
4
2
12
8
4
6
3
3
3
18
12
6
6
4
2
4
24
17
7
6
5
1
5
30
23
7
6
6
0
6
36
30
6
6
7
-1
7
42
38
4
6
8
-2
8
48
47
1
6
9
-3
(Regulating Natural Monopolies) The following graph representsa natural monopoly.a. Why is this firm considered a natural monopoly?b. If the firm is unregulated, what price and output wouldmaximize its profit? What would be its profit or loss?c. If a regulatory commission establishes a price with thegoal of achieving allocative efficiency, what would bethe price and output? What would be the firm’s profitor loss?d. If a regulatory commission establishes a price with thegoal of allowing the firm a normal profit, what would bethe price and output? What would be the firm’s profitor loss?e. Which one of the prices in parts b, c, and d maximizesconsumer surplus? What problem, if any, occurs at thisprice?
(Regulating Natural Monopolies) The following graph rep-
resents a natural monopoly.
a. Why is this firm considered a natural monopoly?
b. If the firm is unregulated, what price and output would
maximize its profit? What would be its profit or loss?
c. If a regulatory commission establishes a price with the
goal of achieving allocative efficiency, what would be
the price and output? What would be the firm's profit
or loss?
Chapter 15 Solutions
Econ Micro (book Only)
Knowledge Booster
Similar questions
- (Monopoly) Suppose that a certain manufacturer has amonopoly on the sorority and fraternity ring business(a constant-cost industry) because it has persuaded the“Greeks” to give it exclusive rights to their insignia.a. Using demand and cost curves, draw a diagram depictingthe firm’s profit-maximizing price and output level.b. Why is marginal revenue less than the price for this firm?c. on your diagram, show the deadweight loss that occursbecause the output level is determined by a monopolyrather than by a competitive market.d. What would happen to price and output if the Greeksdecided to charge the manufacturer a royalty fee of$3 per ring?arrow_forward(dollars) 10 8 6 0 MR MC Quantity 1. A monopoly and is currently charging a price of $10, what would you advise them to do? 2. A monopoly and is currently charging a price of $8, what would you advise them to do? 3. If the monopoly is currently charging a price of $6, what would you advise them to do?arrow_forward25arrow_forward
- 6 (I WILL GIVE YOU THUMBS UP) Please PLEASE answer all questions correct and don’t take more than 10 minutes please and thank you and will give you thumbs uparrow_forward2. (True/False. Explain) Firms in perfect competition experience increase in short run economic profit if demand increases. 3. Differentiate between a price take and a price maker. 4. (True/False. Explain) A monopolist can convert the entire customer surplus into profit. 5. Provide examples of monopoly in the US market. How do they keep the deadweight loss low?arrow_forward(J) Suppose the production process of a particular good creates a negative externality such as pollution. Other things being equal, would society be better off if this good were produced by a perfectly competitive market or by a monopoly? a. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market responds to consumers' desires in the long run b. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market will produce the quantity where Marginal Revenue equals Marginal Cost c. Society would be better off if this good were produced by a monopoly,arrow_forward
- 9arrow_forward(Table: Barrels of Oil) Refer to the table. The change in profit from producing the second barrel of oil is ________, and the marginal cost from producing the seventh barrel of oil is ________.arrow_forwardQuestion: Widget is a commodity that is traded in a perfectly competitive global market that consists of many small price-taking firms. The firms fall in three categories with the following characteristics: Number of firms Capacity of firm's plant (units AVC (S per Fixed cost per unit at full per year) Capital charge per unit at full capacity ($/unit) unit) capacity ($/unit) Type 25 100 units 30 15 10 1 Туре 50 50 units 40 20 10 Type 100 40 units 45 25 10 3 Assume that each firm's AVC is constant up to the capacity of its plant. Further, assume that once built, a firm's plant has zero redeployment value. Finally, assume that a typical entrant has a cost structure identical to the Type 1 firms and that there are many potential entrants. • The demand for widgets is Q = 8000 - 20P, where P is $ per unit and Q is measured in units per year. (Remember: use only whole numbers, and do not use any other characters or spaces.) a. The short-run equilibrium price in the world widgets market is:…arrow_forward
- QUESTION 40 40. Which of the following statements about Adam Smith are FALSE? He argued that a competitive market leads people to serve the public good regardless their motives Smith argued against the Mercantilist policies of import restriction and monopolization. Smith argued for free trade and competition. Smith argued for a weak government and the morality of selfish interest. Smith argued for the empowerment of the individual to engage in economic enterprisearrow_forward5. (5 points 654 Price and cost (dollars) B 10 SMC MR E 300 340 200 ATC Quantity The above graph is for a monopoly firm. The curve labelled "SMC" is the Marginal Cost curve, D Demand curve and MR Marginal Revenue curve, ATC average total cost curve. (a) What is the profit maximizing price and output? (b) At the profit maximizing price and output what is the average total cost? (c) At the profit maximizing price and output what is the amount of profit (in dollars) earned by this firm? Please show your calculations.arrow_forwardPart (b) The diagram below represents a monopoly market with one privately owned power generator. P 90 75 60 45 30 15 0 0 10 20 30 D 40 ATC 50 b1. Show the expected social losses from having a monopoly. Draw in any extra lines you need to show your solution. b2. If a law is passed requiring marginal cost pricing in the above market, what problem would there be for this privately owned power generator. Support your answer with a diagram.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning