Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 9, Problem 9.5IP
To determine
The difference between economic profit in a competitive firm and in a monopolist.
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Students have asked these similar questions
Compare the long-run equilibrium position of a perfectly competitive firm and a monopolist.Illustrate your answer with the aid of diagrams.
Why is there a price markup over marginal cost in
monopolistic competition?
a downward-sloping demand curve, price exceeds
marginal cost
The graph shows the demand curve and marginal revenue
curve of Whitewater, Inc., a producer of rubber rafts in
monopolistic competition.
Draw the marginal cost curve if the firm produces 150 rafts
a week. Label it.
Draw a point at the intersection of the MC and MR curves.
Draw a point to show the price that Whitewater charges for
a raft when it produces 150 rafts a week.
Draw an arrow to show the amount of Whitewater's
markup.
What is Whitewater's markup?
Whitewater's markup is $750 a raft.
750-
675-
600-
525-
450-
375-
300-
225-
150-
75-
0
Price and cost (dollars per raft)
50
100
150
Quantity (rafts per week)
D
MR
200
>>> Draw only the objects specified in the
question.
21
if a monopolistic firm takes over a perfectly competitive market we would expect to see the market price of the good to?
fall because demand is perfectly elastic
rise and quantity sold to fall
fall as the monopolist tries to increase sales
rise and quantity sold to increase
Chapter 9 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- Explain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect competition?arrow_forwardA perfectly competitive firm is onsidered to be more generous in terms of price and quantity of output in comparison to firm belonged to monopoly and monopolistic markets. C. If firms incurring loss in this market begin to exit the market, what will happen to the market equilibrium? Demonstrate your answer using a simplified graph. d. The firm wishes to supply output more than the quantity determined under the equilibrium condition, is it worth to pursue?arrow_forwardNot copy pastearrow_forward
- Compare the market structure of monopoly to perfect competition.how do they differarrow_forwardWhy is a competitive market generally better for society than a monopolistic market?arrow_forwardwhat is the perfect competition economic profit? what is monopolistic competition economic profit? what is the monopoly economic profit?arrow_forward
- Draw a perfect competition (PC) two-diagram model showing the long-run equilibrium outcome. Now imagine that a monopolist buys up all of the PC firms and runs all of the production facilities it has purchased as one company. Relabel the "PC Market" diagram as "Monopoly Market" and the "Representative PC Firm" diagram as "Representative Monopoly Plant". a) In your plant diagram, illustrate the changes in Q*, Pe, ATCE, and total profits or losses that will happen when the monopoly buys up the representative PC firm. Explain in detail all the changes you've made to the diagram. b) Illustrate the monopoly market outcomes in your market diagram. Explain how these outcomes differ from the outcomes when this was a PC market, and why they differ.arrow_forwardWhat are the “monopolistic” and the “competitive” elements of monopolistic competition?Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a monopoly, a monopolistic competitor: can restrict output to increase price (at least in the short run).checked can make profits or losses in the short run.unanswered faces a downward-sloping demand curve.unanswered faces high barriers to entry.unanswered makes economic profits in the long run.unanswered produces where P > MR = MC.unanswered has one seller.unanswered Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.Similar to a perfect competitor, a monopolistic competitor: faces a perfectly elastic demand…arrow_forwardHow does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive firm?arrow_forward
- In the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a grapharrow_forwardWhat gives firms market power in an industry characterized by Monopolistic Competition?arrow_forwardQ.NO.2: Explain the differences between perfect competition and monopoly? Explain how a monopolist is a price maker?arrow_forward
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