Economics For Today
10th Edition
ISBN: 9781337670654
Author: Tucker
Publisher: Cengage
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Chapter 9, Problem 6SQ
To determine
The
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Sara is a single-price, profit-maximizing monopolist who sells her own patented perfume (shown in the graph below).
a. What is the equilibrium price and quantity under monopoly conditions?
b. If instead Sara had to operate like a competitive firm, what would be the equilibrium price and quantity?
c. What is the deadweight loss and total loss to consumer surplus when Sara operates as a monopoly?
d. How much surplus would Sara have if she could act as a perfectly price-discriminating monopolist?
Suppose a monopoly faces the market demand in the figure attached. It has a constant marginal cost equal to $6.
a. Find the monopoly quantity and price. Give a numeric answer for each and show them on the graph.
b. Find the perfectly competitive quantity and price assuming the market is made up of producers each with marginal cost $6. Give a numeric answer for each and show them on the graph.
c. What is the efficient quantity? Give a numeric answer and show it on the graph. Which market structure, monopoly or perfect competition, comes closer to achieving the efficient quantity?
d. Now suppose there is a negative externality associated with producing the good of $5 per unit. Now which market structure, monopoly or perfect competition, comes closer to achieving the efficient quantity? Explain briefly.
How does monopoly compare with pure competition in terms of price, output, and efficiency? Explain.
Chapter 9 Solutions
Economics For Today
Ch. 9.1 - Prob. 1GECh. 9.1 - Prob. 2GECh. 9.2 - Prob. 1YTECh. 9.4 - Prob. 1YTECh. 9 - Prob. 1SQPCh. 9 - Prob. 2SQPCh. 9 - Prob. 3SQPCh. 9 - Prob. 4SQPCh. 9 - Prob. 5SQPCh. 9 - Prob. 6SQP
Ch. 9 - Prob. 7SQPCh. 9 - Prob. 8SQPCh. 9 - Prob. 9SQPCh. 9 - Prob. 10SQPCh. 9 - Prob. 11SQPCh. 9 - Prob. 12SQPCh. 9 - Prob. 13SQPCh. 9 - Prob. 1SQCh. 9 - Prob. 2SQCh. 9 - Prob. 3SQCh. 9 - Prob. 4SQCh. 9 - Prob. 5SQCh. 9 - Prob. 6SQCh. 9 - Prob. 7SQCh. 9 - Prob. 8SQCh. 9 - Prob. 9SQCh. 9 - Prob. 10SQCh. 9 - Prob. 11SQCh. 9 - Prob. 12SQCh. 9 - Prob. 13SQCh. 9 - Prob. 14SQCh. 9 - Prob. 15SQCh. 9 - Prob. 16SQCh. 9 - Prob. 17SQCh. 9 - Prob. 18SQCh. 9 - Prob. 19SQCh. 9 - Prob. 20SQ
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Similar questions
- Do you agree or disagree with each of the following statements? Explain your reasoning. a. For a monopoly, price is equal to marginal revenue because a monopoly has the power to control price. b. Because a monopoly is the only firm in an industry, it can charge virtually any price for its product. c. It is always true that when demand elasticity is equal to –1, marginal revenue is equal to 0.arrow_forwardGoogle dominates online search options and advertising. Some contend Google is a monopoly. First, consider competition and answer these questions: Is Google protected by a barrier to entry, and If so, which barrier(s)? Is there a viable substitute for Google? Second, consider whether Google is a monopoly or not. How does Google’s control of the market influence market price and market quantity? If Google is a monopoly, how would breaking up affect the market price and market quantity? How do we test these hypotheses?arrow_forwardhey how are you a)Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm’s total revenue and total cost. b)Draw the demand curve, marginal revenue curve, average total cost curve, and marginal-cost curve for a monopolist. Show the profit-maximizing level of output, the profit-maximizing price, and the amount of profit. c)Why the demand curve for a firm operating in monopolistic competition is more elastic compared to the firm operating as a monopoly.arrow_forward
- Using the three characteristics of monopoly, explain why each of the following is a monopolist: A.) Local water service B.) San Francisco 49ers football team C.) U.S. postal servicearrow_forwardThe following graph depicts the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for a firm operating as a natural monopoly. Costs and Revenues (dollars) 80 70 60 50 40 30 20 10 0 Market for a Natural Monopoly MC Quantity and ATC MR 10 20 30 40 50 60 70 80 90 100 D B ↑ Instructions: Enter your answers as a whole number. a. If the firm is operating as a natural monopoly, what is the profit-maximizing level of output and price charged to consumers? $ units will be sold b. At what price would the firm earn a normal profit? c. Suppose the government regulated the monopoly such that it were required to charge the perfectly competitive price. What is the regulated price?arrow_forwardWhich of the following is not a characteristic of a monopoly? A. the demand curve is downward-sloping which means that the marginal revenue derived from selling additional unit of a product is below the price B. optimal output is produced where the marginal revenue is equal to the marginal cost C. the optimal output of a monopolist is lower than the output had the market been a purely competitive one D. the monopolist does not incur losses and does not shut down E. all are characteristics of a monopolyarrow_forward
- A natural monopoly is most likely to occur in which of the following industries? Group of answer choices a. the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years b. the diamond mining and marketing industry because one firm can control a key resource c. the software industry because of the importance of network externalities d. an industry where fixed costs are very large relative to variable costsarrow_forwardHow do monopoly firms behave in the marketplace? Do they have “power?” Does this power potentially have unintended consequences?arrow_forwardQuestion 20 How would a profit-maximizing monopoly decide where to produce? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a It will produce where marginal revenue is greater than marginal cost. b It will produce where marginal cost equals demand. C It will produce where average cost equals marginal revenue. d it will produce where marginal cost equals marginal revenue. Question 21 The following table is missing critical information. What is the economic profit or loss at 3 units of quantity?arrow_forward
- Please Answer part f . please draw the complete graph Suppose a monopolist faces demand D = 6 − Q and MR = 6 − 2Q, and has costs T C = 1 + 2Q, and MC = 2. The monopolist is unable to price discriminate. a. Derive the ATC. Is this a natural monopoly and why?. b. Draw the demand curve, MR, MC, ATC on a graph. Make sure to label the curves and axes clearly Calculate the value of the optimal Q and P. Label this on the graph of the previous question (part b). d. Calculate the value of the profit at this point. Also label this on the graph (part b). e. The government’s antitrust division determines this monopoly has too much market power. It has two options: break the monopoly into two smaller companies, or regulate it using a price ceiling. Which should it do and why?. f. The government has decided to enact the price ceiling. On the graph, label the price ceiling that maximizes consumer surplus. Indicate this consumer surplus on the graph (part b).arrow_forwardMarket Structure a. In the short run, if a perfectly competitive firm produced at the quantity of productive efficiency, would it generate the highest profit level possible? Why or why not? b. Draw a graph to represent a natural monopoly and describe the circumstances that would permit natural monopoly to exist. Would it be wise for government to break up natural monopolies? Give some examples of natural monopoliesarrow_forwarda. Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm's total revenue and total cost. b. Draw the demand curve, marginal revenue curve, average total cost curve, and marginal-cost curve for a monopolist. Show the profit-maximizing level of output, the profit-maximizing price, and the amount of profit. c. Why the demand curve for a firm operating in monopolistic competition is more elastic compared to the firm operating as a monopoly.arrow_forward
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