Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 24, Problem 5CQ
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Economics: Private and Public Choice
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- With the aid of an appropriate diagram, discuss why should a monopoly beregulated by the government?arrow_forwardQuestion #10: What is an economic regulation? (Read Chapter 4, 27 and 28), or MindTap Microeconomics 9e (Ch 4, ch. 13, and ch.14) -Boyes W. and Melvin M. (2014), Economics (Full), 10th Edition, South-Western, Cengage Learning. OR -MindTap for Boyes’ Microeconomics 9e. one-page explanation.arrow_forwardWhat is the difference between government granted monopolies and free market monopolies? Which one is more cost efficient and why?arrow_forward
- Genentech owns a patent on tissue plasminogen activator (TPA), which is an enzyme that helps the body break down blood clots. TPA is particularly valuable to cardiac patients, since it often allows heart problems to be treated with medication rather than surgery. Recently, however, firms in the medical industry have come under fire by some members of Congress and the press for charging high prices and earning monopoly profits. a. If the government stripped Genentech and other pharmaceutical firms of their patents, do you think cardiac patients would benefit? Why?arrow_forwardDiscuss the dilemma of regulation faced by the government in the case of regulating monopoly?arrow_forwardWhy and how do governments regulate natural monopolies? Examine the strengths and weaknesses of different types of regulation. In the light of your analysis what recommendations would you make for government policy?arrow_forward
- Ch Suppose that there are only three types of fruit sold in the United States. Annual sales are 1,200,000 tons of blueberries, 5,400,000 tons of strawberries, and 12,000,000 tons of bananas. Suppose that of those total amounts, the Sunny Valley Fruit Company sells 1,100,000 tons of blueberries, 900,000 tons of strawberries, and 9,200,000 tons of bananas. Instructions: Round your answers to two decimal places. a. What is Sunny Valley's market share if the relevant market is blueberries? percent If a court applies the "90-60-30 rule" when considering just the blueberry market, would it rule that Sunny Valley is a monopoly? (Click to select) b. What is Sunny Valley's market share if the relevant market is all types of berries? percent Would the court rule Sunny Valley to be a monopolist in that market?arrow_forwardThe diagram above represents a monopolist firm. Answer the following questions: What price will this firm charge and what quantity produced in order to maximize profit? Explain your answer. If this firm becomes regulated and the regulatory agency want to achieve economic efficiency, what will be the price and quantity? Explain your answer. If the monopolist operates at the economic efficiency level, will he be making a profit or loss? Explain. Suppose the regulatory agency wants the monopolist to charge a price that matches what it costs to produce a unit of the good/service. What price will this be and what would be the quantity produced? Explain. At a price ceiling of $41 what would be the profit/loss of the monopolist?arrow_forwardProvide the difference between Legal Regulatory Requirements and Policy. Give an examplearrow_forward
- What is meant by a regulatory taking?arrow_forwardA monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopolized markets and competing for customers. Consider the market for taxi services. In order to own and operate a taxi, drivers are required to obtain a taxi medallion. Which of the following best explains the barriers to entry that exist in this scenario? Increasing returns to scale Control over an important input O Legal barriersarrow_forwardThe figure to the right shows the market demand for electricity and the average total cost and marginal cost of producing electricity for a utility company. Suppose the utility company is a regulated natural monopoly. If government regulators want to achieve economic efficiency, then they will regulate a price of $ per kilowatt hour. (Enter a numeric response using a real number rounded to two decimal places) Now suppose instead that government regulators want to eat the lowest price such that the utility company will not suffer a loss so that it will continue to produce in the long run. If so, then i government regulators will set a price of $ per kilowatt hour. Price and cost (dollars per kilowatt hour) 0.52 048 044- 040- 0.36 0324 0.26 0.24 0.20 0.16 0.12 0.06 004 0.00+ ATC MC 4 8 12 16 20 24 28 32 36 40 44 48 Quantity of kilowatt hours (in billions)arrow_forward
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