Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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Answer 1

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

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Problem 2. If the consumer preference can be represented by a CES function with δ = 0.5, i.e. u(x, y) = x0.5 + y0.5. Let the prices and income be (px, py, w). 1. Set up the Lagrangian expression.2. Take the first-order conditions.3. Substitute into budget constraint to derive the optimal consumption bundles.

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1. Imagine a society that produces military goods and consumer goods, which we'll call "guns" and "butter." a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient. c. Imagine that the society has two political parties, called the Hawks (who want a strong military) and the Doves (who want a smaller military). Show a point on your production possibilities frontier that the Hawks might choose and a point the Doves might choose. d. Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Hawks and the Doves reduce their desired production of guns by the same amount. Which party would get the bigger "peace dividend," measured by the increase in butter production? Explain.

Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

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

Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists 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

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists 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 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Answer 6

Chapter 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Answer 7

Chapter 16, Problem 1FT

Subpart (a):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

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. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. Thus, when the willing price is higher than the actual price, there will be consumer surplus and there will be no consumer surplus when the willing price is lower than the actual price. Producer surplus, on the other hand, is the difference between the lowest price the producer is willing to accept and the actual price that the producer receives by selling his product. Thus, when the price is higher, the producer surplus will also be high and vice versa.

The network goods provide greater value to their consumers when the number of the consumers using the commodity increases. Thus, the value to the consumers increases as the people using it increases and vice versa. Thus, when the anti-trust laws are forced to bring competition among them, it would create disturbances in the network of the consumers of the commodity which adversely affects the consumers by reducing the value to them.

Answer 9

Subpart (a):

Expert Solution

Answer 10

Subpart (a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Answer 13

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Answer 14

Subpart (b):

To determine

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Answer 15

Subpart (b):

Expert Solution

Explanation of Solution

When the market is highly contestable, the firms in the market would act as if they are facing very stiff competition in the market. Thus, even though there is only the potential competition in the market, there will be no difference between the firms in it and in the competitive market. Thus, there is no need of the anti-trust laws in the market.

Answer 16

Subpart (b):

Expert Solution

Answer 17

Subpart (b):

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest price the consumer is willing to pay and the actual price that the consumer pays.

Producer surplus: It is the difference between the lowest price the producer is willing to accept and the actual price received by the producer.

Anti-trust laws: Anti-trust laws are the laws that were introduced by the U.S. government to protect consumers from predatory business practices by ensuring that there fair competition exists in the market.

Answer 20

Ch. 16 - Prob. 1FT Ch. 16 - Prob. 2FT Ch. 16 - Prob. 3FT Ch. 16 - Prob. 4FT Ch. 16 - Prob. 5FT Ch. 16 - Prob. 6FT Ch. 16 - Prob. 1TPS Ch. 16 - Prob. 2TPS Ch. 16 - Prob. 3TPS Ch. 16 - Prob. 4TPS

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Explanation of Solution

Why anti-trust laws are not helpful in markets of network goods and are highly contestable.

Explanation of Solution

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