Principles of Economics
7th Edition
ISBN: 9781305156043
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Chapter 15, Problem 5QCMC
To determine
The causes of deadweight loss .
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Draw the graph. If the monopoly is a doing perfect price discrimination, then:
1. the monopoly produces a quantity Q = ______ where ________________ (which curves intersect?)2. the monopoly charges a price of ________ (trick question!!!!)3. the consumer surplus is CS = ______. 4. the producer surplus is PS = _________(identify the area on the graph and calculate it).5. this monopoly ________ (is / is not) efficient because ______________________.
When will a monopoly set its price equal to marginal cost?
A monopoly will set its price equal to marginal cost when
A. consumer demand is infinitely elastic.
B. new firms cannot threaten to enter.
C. consumers are not sensitive to price.
D. its marginal revenue curve is downward-sloping.
E. it has no fixed costs.
A monopoly barber sells haircuts to adults for 30 and
A monopoly barber sells haircuts to adults for $30 and to children for $10. Let ηΑ represent adults’ elasticity of demand for haircuts and let ηC represent children’s elasticity of demand.a. Explain why |ηΑ| and |ηC| must both be greater than 1.b. Find a formula for ηA in terms of ηC.c. What is the largest possible value for |ηΑ|?
A monopoly barber sells haircuts to adults for 30 and
Chapter 15 Solutions
Principles of Economics
Ch. 15.1 - Prob. 1QQCh. 15.2 - Prob. 2QQCh. 15.3 - Prob. 3QQCh. 15.4 - Prob. 4QQCh. 15.5 - Prob. 5QQCh. 15 - Prob. 1QRCh. 15 - Prob. 2QRCh. 15 - Prob. 3QRCh. 15 - Prob. 4QRCh. 15 - Prob. 5QR
Ch. 15 - Prob. 6QRCh. 15 - Prob. 7QRCh. 15 - Prob. 8QRCh. 15 - Prob. 1QCMCCh. 15 - Prob. 2QCMCCh. 15 - Prob. 3QCMCCh. 15 - Prob. 4QCMCCh. 15 - Prob. 5QCMCCh. 15 - Prob. 6QCMCCh. 15 - Prob. 1PACh. 15 - Prob. 2PACh. 15 - Prob. 3PACh. 15 - Prob. 4PACh. 15 - Prob. 5PACh. 15 - Prob. 6PACh. 15 - Prob. 7PACh. 15 - Prob. 8PACh. 15 - Prob. 9PACh. 15 - Prob. 10PACh. 15 - Prob. 11PA
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- What is the deadweight loss associated with monopoly? A. The loss in consumer surplus due to high prices and reduced output B. The loss in producer surplus due to low prices and excess supply C. The loss in government revenue due to taxation D. The loss in economic efficiency due to government interventionarrow_forwardWhat is the dead weight loss? a.The loss in welfare due to the monopoly producing a LARGER amount than a competitive market would b. None of the other answers is correct c.A new weight loss system d.The loss in welfare due to the monopoly producing a SMALLER amount than a competitive market wouldarrow_forwardCurrently the market for domestic air travel in OzLand is a monopoly with Qanwings as the supplier. A new supplier, Cheap Flights, enters the market. Suppliers in the market compete by simultaneously choosing the quantity of flights they will supply. Which of the following is most likely to occur after the entry of the new supplier to the market for domestic air travel? a.The total quantity of flights will increase. b.The total quantity of flights will not change. c.The total quantity of flights will decrease. d. It is not possible to say what will happen to the quantity of flights.arrow_forward
- How does the monopoly price compare to the competition price ? Assume all other things are equal, of course, or a comparison is meaningless. Also assume no price discrimination - just one price the monopoly can use. Assume normal shaped demand curves (not completely inelastic or elastic ) a.Monopoly price is usually higher but can also be lower. b.Monopoly price is the same as competition. c. Monopoly price is lower than competition. d.Monopoly price is higher than competition. Which one ?arrow_forwardThe deadweight loss from monopoly arises becausea. the monopoly firm makes higher profits than acompetitive firm would.b. some potential consumers who forgo buying thegood value it more than its marginal cost.c. consumers who buy the good have to pay morethan marginal cost, reducing their consumersurplus.d. the monopoly firm chooses a quantity that failsto equate price and average revenue.arrow_forwardLabel the graph.arrow_forward
- Hot Air Balloon Rides is a single-price monopoly. Columns 1 and 2 of the table set out the market demand schedule and columns 2 and 3 set out the total cost schedule. Calculate Hot Air's profit-maximizing output and price. Calculate the economic profit. Hot Air's profit-maximizing number of rides is 3 a month and the profit-maximizing price is $160 a ride. >>> Answer to 1 decimal place. C Price (dollars per ride) 220 200 180 160 140 120 Quantity (rides per month) ܘ ܝ ܚ ܚ ܟ ܗ 2 3 4 5 Total cost (dollars per month) 80 160 280 440 640 880arrow_forwardFigure 15-8 Price A B с MR X Y Y Z MC D Quantity Refer to Figure 15-8. What is the monopoly price and quantity? a. price = B; quantity = Y b. price = C; quantity = X c. price = B; quantity = X d. price = A; quantity = Xarrow_forwardFigure: Demand Elasticity Price MR D Quantity Monopoly A Price MR D Quantity Monopoly Barrow_forward
- Is a monopoly always bad for society? a. No. For example, patents on medications create monopolies, and increase the price and reduce the quantity sold, but without them, no one would take the high costs of developing new drugs and the quantity will be... zero! b.Monopoly is not bad if its owner gives back to society in charity. c.Yes, Monopoly is always bad d. None of the other answers is correctarrow_forwardDraw the graph. If the monopoly is a doing perfect price discrimination, then: the monopoly produces a quantity Q = ______ where ________________ (which curves intersect?) the monopoly charges a price of ________ (trick question!!!!) the consumer surplus is CS = ______. the producer surplus is PS = _________(identify the area on the graph and calculate it). this monopoly ________ (is / is not) efficient because ______________________.arrow_forwardin monopoly, market power permits you to price above MC. What limits how high a price you can set? a. government b. Depends on the demand elasticity for the product c. Depends on the supply elasticity of the product d. no limitarrow_forward
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