MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Question
Chapter 16, Problem 7QE
To determine
The monopolist willing to spend to protect the market position.
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Question 4: The Baxter brothers - Bob, Bill, Ben and Brad – have just made a documentary movie about their basketball
team. They are thinking about making the movie available for download on the internet. They can act as a monopolist if
they choose to do so. Each time the movie is downloaded, their Internet Service Provider charges them a fee of $4. The
Baxter brothers are arguing about which price to charge the customer per download. Here is the demand schedule for
their film:
Quantity of Downloads
Denanded
Price of
Download
$10
4
6.
2
10
15
a) Calculate the total revenue and marginal revenue per download.
Price
Quantity
TR
MR
$10
6.
3
10
15
b) Bill is proud of the film and wants as many people as possible to download it. What price would he choose?
How many downloads would be sold?
c) Bob wants as much total revenue as possible. What price would he choose? How many downloads would be
sold?
d) Ben wants to maximize profits. What price would he choose? How many downloads would be sold?…
The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps
releve arthritis pain.
Place the grey point (star symbol) in the appropriate location on the graph to Indicate the monopoly outcome such that the dashed lines reveal the
profit-maximizing price and quantity of a single-price monopolst. Then, use the green rectangle (triangle symbols) to show the profits earned by the
monopolist.
10
Manapaly Outcome
Manapaly Profits
4
MC = ATC
1.
MR
Damand
3 4
QUANTITY (Millians of dasas par yaar)
5
6
10
1
2
6
8
Suppose that should the patent on this particular drug explre, the market would become perfectly competitive, with new firms Immedlately enterling
the market with essentially Identical products.
Further suppose that In this case the original firm will hire lobbylsts and make donations to several key politicians to extend Its patent for one more
year. The firm Is prepared to spend up to $
million to extend…
Chapter 16 Solutions
MICROECONOMICS
Ch. 16.1 - Prob. 1QCh. 16.1 - Prob. 2QCh. 16.1 - Prob. 3QCh. 16.1 - Prob. 4QCh. 16.1 - Prob. 5QCh. 16.1 - Prob. 6QCh. 16.1 - Prob. 7QCh. 16.1 - Prob. 8QCh. 16.1 - Prob. 9QCh. 16.1 - Prob. 10Q
Ch. 16 - Prob. 1QECh. 16 - Prob. 2QECh. 16 - Prob. 3QECh. 16 - Prob. 4QECh. 16 - Prob. 5QECh. 16 - Prob. 6QECh. 16 - Prob. 7QECh. 16 - Prob. 8QECh. 16 - Prob. 9QECh. 16 - Prob. 10QECh. 16 - Prob. 11QECh. 16 - Prob. 12QECh. 16 - Prob. 1QAPCh. 16 - Prob. 2QAPCh. 16 - Prob. 3QAPCh. 16 - Prob. 4QAPCh. 16 - Prob. 5QAPCh. 16 - Prob. 6QAPCh. 16 - Prob. 1IPCh. 16 - Prob. 2IPCh. 16 - Prob. 3IPCh. 16 - Prob. 4IPCh. 16 - Prob. 5IPCh. 16 - Prob. 6IPCh. 16 - Prob. 7IPCh. 16 - Prob. 8IPCh. 16 - Prob. 9IPCh. 16 - Prob. 10IPCh. 16 - Prob. 11IP
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Similar questions
- 1. Which of the following companies most closely resembles a monopoly? Walmart Microsoft Starbucks McDonald's Question Source: Chiang 4e - Economics Princip 39 36 近arrow_forwardHow much is total surplus if the market is perfectly competitive?How much is total surplus if the market is controlled by a single price monopolist?Suppose the single price monopolist started charging all customers the maximum price they are willing to pay. How much additional surplus is created?arrow_forwardThe following graph gives the demand (D) curve for satellite TV services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local satellite TV company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per subscription) 100 90 80 70 20 10 0 + 0 2 MR True 6 8 10 12 14 QUANTITY (Number of subscriptions) 16 O False ATC MC 18 20 D Which of the following statements are true about this natural monopoly? Check all that apply. Monopoly Outcome In order for a monopoly to exist in this case, the government must have intervened and created it. The satellite TV company is experiencing economies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The satellite TV company…arrow_forward
- Why is monopoly considered as a price maker?arrow_forwardThere is a monopolist in a market for a particular type of consumer goods. It is costly to create new types of products (brands) in this market, but consumers have different taste and thus some will prefer the new brand. Will the monopolist create too few brands or too many? Explain.arrow_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
- Why does consumer surplus decline when monopolies are present?arrow_forwardThe following graph gives the demand (D) curve for 5G LTE services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local 5G LTE company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. 20 18 16 1 20 1 PRICE (Dollars per gigabyte of data) 2 ATC MC- Monopoly Outcome MR D 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Gigabytes of data) Which of the following statements are true about this natural monopoly? Check all that apply. The 5G LTE company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. In order for a monopoly to exist in this case, the government must have intervened and created it. The 5G LTE company is experiencing economies of scale. True or…arrow_forwardThe following graph gives the demand (D) curve for 5G LTE services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local 5G LTE company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per gigabyte of data) 20 18 16 14 12 10 4 2 0 0 1 2 4 True MR 3 5 7 QUANTITY (Gigabytes of data) O False 6 8 ATC MC 9 10 D + Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. ? The 5G LTE company must own a scarce resource. The 5G LTE company is experiencing diseconomies of scale. The 5G LTE company is experiencing economies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government…arrow_forward
- The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps relieve arthritis pain. Place the grey point (star symbol) in the appropriate location on the graph to indicate the monopoly outcome such that the dashed lines reveal the profit-maximizing price and quantity of a single-price monopolist. Then, use the green rectangle (triangle symbols) to show the profits earned by the monopolist. PRICE (Dollars per dose) 0 19 1 MC ATC MR 2 3 7 5 4 5 6 QUANTITY (Millions of doses per year) Demand 9 10 [x| Monopoly Outcome Monopoly Profits Suppose that should the patent on this particular drug expire, the market would become perfectly competitive, with new firms immediately entering the market with essentially identical products. Further suppose that in this case the original firm will hire lobbyists and make donations to several key politicians to extend its patent for one more year. The firm is prepared to…arrow_forwardWhat stops oligopolists from acting together as a monopolist and earning the highest possible level of profits? Is there a way for oligopolists to attempt to cooperate and maximize profits? What are the risks of such attempts (and ultimately, generally cause such attempts to fail)?arrow_forwardSuppose a monopolist faces a market demand curve Q = 50 - p. If marginal cost is constant and equal to zero, what is the magnitude of the welfare loss? If marginal cost increases to MC = 10, does welfare loss increase or decrease? Use a graph to explain your answer.arrow_forward
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