Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 17, Problem 3.2P
To determine
Why the national restaurant chains find it beneficial to locate inside the largest airports.
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Suppose the local electrical company, a legal monopoly based on economies of scale, was split into four firms of equal size, with the
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Blue INK is the only cabel service provider in Gazipur. The diagram below depicts the price, output and costs incurred by Blue INK. Use the graph to answer the following questions:
1. What is the Total revenue generated by Blue INK at the profit maximizing level of output?
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Suppose that you are a manager for a firm like EBC Brakes, which manufactures brakes for automobiles and motorcycles. Your company has two plants, one in the United States and the other in the United Kingdom. The following tables include estimated demand and marginal revenue for your brakes, along with the marginal costs at the two factories.
what quantity and price maximize your firms profit?
What is the profit – maximizing number of brakes produced in the U.S. plant? In the U.K. plant?
Quantity Demanded (brakes per hour)
Price
(dollars per brake)
Quantity Produced in the U.K. plant (brakes per hour)
Quantity Produced in the U.S. (brakes per hour)
Total Quantity Produced
Marginal Cost (dollars per brake)
Marginal Revenue (dollars per brake)
104
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42
89
66
92
105
195
48
44
92
68
90
106
194
49
46
95
70
88
107
193
50
48
98
72
86
108
192
51
50
101
74
84
109
191
52
52
104…
Chapter 17 Solutions
Principles of Economics (12th Edition)
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- Most smartphones in the United States use Apple's IOS or Google's Android operating system. What market structure applies to the market for smartphone operating systems? Why?arrow_forwardThe figure below illustrates the market for steel. If the steel market is competitive, firms can produce steel at a constant marginal cost of $100 per ton. Therefore, the price of steel is $100 per ton, and 100 tons are produced. Assume that if all the steel companies consolidate into a monopoly, the monopoly marginal cost will fall to $70 per ton. Use the straight line tool to draw the monopoly marginal revenue and marginal cost lines (extend the marginal cost line to 300 tons). Then use the plot point tool to plot the monopoly profit maximizing price and output on the demand curve. Part 2. If the market is competitive, total surplus is $ _________ Part 3. If the market is controlled by a monopoly, total surplus is $________arrow_forwardMelCo’s Xamoff The global pharmaceuticals giant, MelCo, has had great success with Xamoff, and over-thecounter medicine that reduces exam-related anxiety. A patent currently protects Xamoff from competition, although rumors persist that similar products are in development. Two years ago, MelCo sold 25 million units for a price of $10 for a package of ten. Last year it raised the price to $11, and sales fell to 22 million units. Finally, a financial analyst estimates the cost of production at $2 per package. (a) Estimate the elasticity of demand for this product at $10. Is this price too high or too low? (b) Estimate the elasticity of demand for this product at $11. Is this price too high or too low? (c) Based on your answers to (a) and (b), what can we say about MelCo’s profit-maximizing price?arrow_forward
- Suppose a monopoly is producing at its profit-maximising (loss-minimizing) quantity, and the price corresponding to this quantity is below average total cost but above average variable cost. The monopoly will shut down in the short run but return to production in the long run shut down in the short run and exit the market in the long run keep producing both in the short run and in the long run keep producing in the short run but exit the market in the long run None of the above.arrow_forwardFor people with life-threatening allergies, carrying a device that can automatically inject epinephrine (called an autoinjector) is a necessity. In the summer of 2016, Mylan, the maker of the widely used autoinjector EpiPen, found itself with a virtual monopoly. A year earlier its primary competitor, Auvi-Q, was recalled amid fears that it would malfunction and deliver the wrong dose. In addition, the FDA denied the drug producer, Teva, from releasing a generic autoinjector. Prior to these events, a two-pack EpiPen sold for approximately $100. But during that summer, Mylan raised the price to over $650 per pack, leading to extensive news coverage, popular online petitions, and outrage on the part of consumers. Mylan countered that many consumers received their EpiPens through their medical insurance, hence they were protected from the price increase. For those who didn't have insurance coverage and had to pay the full price, Mylan offered a $300 savings card. a. In the graph, shade the…arrow_forwardName-Brand Prescription Drugs Market—“Happy Pill”—that greatly improves life but is not essential to life. Using supply and demand analysis, explain what happens to the market price and quantity of a name-brand prescription drug Happy Pill if its patent expires. Using supply and demand analysis explain why Happy Pill might be advertised. Using supply and demand analysis, explain what would happen to the price and quantity of Happy Pills if there was a severe recession, and people lost their jobs, which included a health-care benefit that payed for prescription drugs.arrow_forward
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