Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 9, Problem 32P
Draw the
Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
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Draw the demand curve, marginal revenue, and marginal cost curves for a monopoly and indicate the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price.
The table below shows cost data for producing different amounts of cleaning products. Suppose this market
is a monopoly. Use the information in the table to find the output where the monopoly would maximize
profit.
Price ($) Quantity Total Revenue ($) Total Cost ($)
150
0
0
100
120
5
600
180
100
10
1000
400
90
15
1350
675
80
20
1600
1120
70
25
1750
1750
Profit maximizing quantity:
What is the profit the monopoly achieved? $
The inverse demand curve a monopoly faces is
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The firm's cost curve is
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The profit-maximizing quantity is.
The profit-maximizing price is $
What is the firm's economic profit?
The firm earns a profit of $ . (Round your response to two decimal places.)
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Chapter 9 Solutions
Principles of Economics 2e
Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Suppose the local electrical utility, a legal...Ch. 9 - If Congress reduced the period of patent...Ch. 9 - Suppose demand for a monopolys product falls 50...Ch. 9 - Imagine a monopolist could charge a different...Ch. 9 - How is monopoly different from perfect...Ch. 9 - What is a barrier to entry? Give some examples.Ch. 9 - What is a natural monopoly?Ch. 9 - What is a legal monopoly?
Ch. 9 - What is predatory pricing?Ch. 9 - How is intellectual property different from other...Ch. 9 - What legal mechanisms protect intellectual...Ch. 9 - In what sense is a natural monopoly natural?Ch. 9 - How is the demand curve perceived by a perfectly...Ch. 9 - How does the demand curve perceived by a...Ch. 9 - Is a monopolist a price taker? Explain briefly.Ch. 9 - What is the usual shape of a total revenue curve...Ch. 9 - What is the usual shape of a marginal revenue cuwe...Ch. 9 - How can a monopolist identify the...Ch. 9 - How can a monopolist identify the...Ch. 9 - When a monopolist identifies its profit-maximizing...Ch. 9 - Is a monopolist allocatively efficient? Why or why...Ch. 9 - How does the quantity produced and price charged...Ch. 9 - ALCOA does not have the monopoly power it once...Ch. 9 - Why are generic pharmaceuticals significantly...Ch. 9 - For many years, the Justice Department has tried...Ch. 9 - Intellectual property laws are intended to promote...Ch. 9 - Imagine that you ale managing a small firm and...Ch. 9 - If a monopoly firm is earning profits, how much...Ch. 9 - Return to Figure 9.2. Suppose P0 is 10 and P1 is...Ch. 9 - Draw the demand curve, marginal revenue, and...Ch. 9 - Draw a monopolists demand curve, marginal revenue,...
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- Review the graph at right. Monopoly 100- What is the unregulated monopoly price? $ (enter your response as a whole number) 90- MC What is the unregulated monopoly output? (enter your response as a whole 80 number) 70- P=$00 60- The total unregulated welfare (CS + PS) is $- (round your answer to the nearest penny) 50- 40 What is the optimal monopoly regulated price? $ (enter your response as a whole number) MCE$30 30- 20 The total regulated welfare (CS + PS) is $. (round your answer to the nearest penny) FQ=30 MR 50 60 70 80 90 100 Quantity 10 20 30 40 20 tv MacBook Air 80 DII DD F2 F3 F4 F6 F7 F8 F9 F10 F11 @ %23 2$ 2 3 4 8 { W E Y U P S D F G н J K > C V N M and command opti .. .- • V Barrow_forwardSuppose you are the owner of a firm that is an unregulated monopoly. You find that your marginal cost curve is: MC = 40 + 3Q where MC is dollar marginal cost and Q is output. Suppose also that the demand curve for your product is P = 100 - Q where P is product price and Q is output. If you want to maximize profit, what Q should you choose? Please show work.arrow_forwardAn unregulated natural monopoly bottles Mt. McKinley air, unique clean air that has no substitutes. The monopoly's total fixed cost is $30,000 a year and its marginal cost is 10 cents a can. The graph illustrates the demand for Mt. McKinley air. Draw the average total cost curve. Plot the four control points at the quantities 100,000, 200,000, 300,000, and 400,000. Label the curve. Draw a point at the new quantity and price if the regulator sets a price cap such that the monopoly breaks even. The number of cans produced sold its marginal cost. A. is; benefit; exceeds B. is not; benefit; exceeds OC. is not; revenue; is greater than D. is; revenue; equals the efficient quantity because the marginal from the last can 60- 50- 40- 30- 20 20 10- Price (cents per can) 0- ATC MC D $300 100 200 300 400 Quantity (thousands of cans per year) >>> Draw only the objects specified in the question. 500arrow_forward
- Review the graph at right. Monopoly 100- What is the unregulated monopoly price? $ (enter your response as a whole number) MC 90- What area represents the consumer surplus for an unregulated monopolist? 80- 70- P= $60 60 What area represents the producer surplus for an unregulated monopolist? A, B, & C - What area represents the deadweight loss? 50- 40- D MC = $30 30- The welfare for the unregulated monopoly is V the welfare when optimal monopoly regulation is used. 20- 10- Q = 3OMR ó 10 20 30 40 50 60 70 80 90 100 Quantity 0- DEC dtv A 20 MacBook Air DII F11 F10 F4 F2 F3 & %23 %24 7 8. 3 4 { P Q W E R Y F G J K L A S D > C V M command option on command .. .- リ • V * COarrow_forwardYou are the manager of a monopoly. If the marginal cost of your product is $100 and the price elasticity of demand for your product is 3, then the markup of price over marginal cost you should set is equal to. (Round your answer to one decimal place.) (Round your answer to one decimal place.) If the price elasticity of demand is 6 rather than 3, the markup you should set is equal to Use your knowledge of the factors that affect the magnitude of the price elasticity of demand to explain the difference in the markups in your answers to the last two parts. O A. A smaller price elasticity of demand suggests that your good is a normal good, which allows you to set a higher markup. OB. A smaller price elasticity of demand suggests that there are many substitutes for your good, which allows you to set a higher markup. OC. A smaller price elasticity of demand suggests that there are few substitutes for a good, which allows you to set a higher markup. D. A smaller price elasticity of demand…arrow_forwardAn unregulated natural monopoly bottles Liquid Sunlight, a unique product with no substitutes. The monopoly's total fixed cost is $190,000 and its marginal cost is 30 cents a bottle. How many bottles of Liquid Sunlight does the monopoly sell and what is the price of a bottle of Liquid Sunlight? Is the monopoly's use of resources efficient? The graph shows the demand curve for Liquid Sunlight. Draw the marginal revenue curve. Label it MR. Draw the marginal cost curve. Label it MC. Draw a point at the monopoly's profit-maximizing quantity and price. 60 50- 40- 30- 20- 10- 0- Price and cost (cents per bottle) 0 D 0.5 1.5 2 Quantity (millions of bottles per year) >>> Draw only the objects specified in the question. 2.5arrow_forward
- Review the graph at right. Monopoly What is the unregulated monopoly price? $ 60 (enter your response as a whole number) 100- 90- What is the unregulated monopoly output? 30 (enter your response as a whole number) MC 80- The total unregulated welfare (CS + PS) is $1800 (round your answer to the nearest penny) 70- 60- What is the optimal monopoly regulated price? $(enter your response as a whole number) 50- The total regulated welfare (CS + PS) is $. (round your answer to the nearest penny) 40- TMCE$30 30- 20- 10- 0- 10 Q#3 MR 20 30 40 50 60 70 80 90 100 Quantity O stv DEC 20 MacBook Air DII F10 FB F3 F4 FS F2 F1 # % & 1 2 3 4 5 7 8 9 { T Y P Q W E G H J K A > C V B command option tion command .. .- D.arrow_forward10. A monopoly has a demand curve given by P = 20-Q and its cost function is TC = Q2+70. Find the monopoly’s quantity and price. What is this firm’s profit? Should this firm remain open or shut down in the SR? Why?arrow_forwardA monopoly market is characterized by the profit maximizer, price maker, high barriers to entry, single seller, and price discrimination. The information on the table below is a typical monopoly firm. Use it to answer the questions that follow Output Price Total Cost 0 $100 $200 1 100 290 2 100 350 3 100 390 4 100 470 5 100 560 6 100 700 7 100 900 i. What is the profit maximizing or loss minimizing quantity of output of this firm to produce? Why? ii. What is the profit or loss at the profit maximizing or loss minimizing output level? iii. Should the firm shut down or remain in operation? Why? iv. Assuming this is a representative firm in the industry or market, given the profits or losses incurred, what can be expected to happen over time in the market?arrow_forward
- Suppose a monopoly's price elasticity of demand equals-5 and the marginal cost of production equals $500.00. The profit-maximizing price is $ 625 (Enter a numeric response using a real number rounded to two decimal places.) What will be the firm's markup? When maximizing profit, the monopoly's markup is______percent. (Round your response to the nearest percent.)arrow_forwardSuppose a monopoly firm has the following Cost and Demand functions: TC=Q2 P=80-Q MC=2Q MR=80-2Q Carefully explain what the firm is doing and why. Find the firm’s Profit maximizing Q Find the firm’s Profit maximizing P. Find the firm’s Profit. Suppose because of an advertising campaign, which costs $500, the monopoly’s demand curve is: P=100-Q so its MR= 100-2Q. MC=2Q Looking closely at the TC function and the demand curve, explain the effects of the advertising campaign on the equations compared with the equations above in part 1. Find the firm’s Profit maximizing Q Find the firm’s Profit maximizing P. Find the firm’s Profit. Was the advertising campaign successful? Compare 2 w/ 1. Why?arrow_forwardSuppose a monopoly's price elasticity of demand equals -2 and the marginal cost of production equals $400.00. The profit-maximizing price is $ (Enter a numeric response using a real number rounded to two decimal places., What will be the firm's markup? When maximizing profit, the monopoly's markup is percent. (Round your response to the nearest percent.) 20 Mact 80 F1 F2 F3 F4 F5 F6 F7 @ 23 $ & 1 3 4 7 8 Q W E R Yarrow_forward
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