Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 15, Problem 4QAP
To determine
The relation between the market structure and firm’s behaviour.
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What is then the use or relevance of the purely competitive model?
Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power.
The following graph shows the demand (D�) and supply curves (S=MC�=MC) in the market for hot dogs.
Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition.
Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue…
Consider the weekly market for gyros in a popularneighborhood close to campus. Suppose this market is operating in long-run competitive
equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act
as price takers and each individual vendor has no market power.
The following graph displays the supply (SMC) and demand (D) curves in the weekly market for gyros.
Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.
(?)
(0)
50
45
PRICE (Dollars per gro)
4.0
3.5
30
2.0
15
1.0
D
3.5
30
25
Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obcain exclusive rights to sell gyros in the
neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change does
not affect demand and that the marginal cost curve of the new…
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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- Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Is the market competitive? Scenario In a college town, students choose between two providers of wireless internet access. All student housing is wired for both companies, and the internet service offered by both providers is equally fast and reliable. Several online retailers sell vintage crewneck sweatshirts. Each shop's crewnecks are characterized by the style of that particular brand. In addition, some producers use only cotton while others use a polyester blend, a distinction reflected in the price of the crewnecks. There are thousands of ninth and tenth graders in need of geometry tutoring services in San Francisco. Of the twenty or so companies in town currently offering geometry tutoring, parents of high schoolers view the quality of each individual tutoring service to be about the same. The government grants a patent to a pharmaceutical…arrow_forwardConsider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. PRICE (Dollars per gyro) 5.0 PRICE (Dollars per gyro) 4.5 4.0 3.5 1.0 0.5 5.0 4.5 4.0 0.5 0 0 10 20 0 10 30 Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in the neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change does not affect demand and…arrow_forwardConsider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 4.0 S-MC 35 30 X 2.0 1.5 1.0 + 20 30 PRICE (Dollars per gyra) 5.0 0.5 RICE (Dollars per gyro) 0 5.0 4.5 4.0 3.5 3.0 2.5 Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in the neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this…arrow_forward
- Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run perfectly competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Use the green point (triangle symbol) to shade the area that represents consumers' surplus, and use the purple point (diamond symbol) to shade the area that represents producers' surplus. PRICE (Dollars per hot dog) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 20 40 Perfectly Competitive Market S=MC D 60 80 100 120 140 160 180 200 QUANTITY (Hot dogs) PC Outcome A Consumers' Surplus Producers' Surplus Assume that one of the hot dog vendors successfully lobbies the city council to…arrow_forwardConsider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros. Consider the welfare effects that result from the industry operating as a competitive market versus a monopoly. On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive outcome. In the…arrow_forwardConsider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and…arrow_forward
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