. Amos McCoy is currently raising corn on his 100-acre farm and earning an accounting profit of $100 per acre. However, if he raised soybeans, he could earn $200 per acre. Is he currently earning an economic profit? Why or why not?
2. Determine whether each of the following is an explicit cost or an implicit cost:
a) Payments for labor purchased in the labor market
b) A firm’suse of a warehouse that it owns and could rent to another firm
c) The wages that owners could earn if they did not work for themselves
3. What are economies of scale? Please give an example. What are diseconomies of scale? Please give an example.
4. Your rich relative died and left you $100,000, which you decided to use for your own Internet business. …show more content…
20. (Perfect Competition and Efficiency) Define productive efficiency and allocative efficiency. What conditions must be met to achieve them?
21. (Barriers to Entry) Explain how economies of scale can be a barrier to entry.
22. (Allocative and Distributive Effects) Why is society worse off under monopoly than under perfect competition, even if both market structures face the same constant long-run average cost curve?
23. (Conditions for Price Discrimination) List three conditions that must be met for a monopolist to price discriminate successfully.
24. (Price Discrimination) Explain how it may be profitable for South Korean manufacturers to sell new autos at a lower price in the United States than in South Korea, even with transportation costs included
25. How did the De Beers cartel try to maintain control of the price in the diamond market? How was this control undermined? Briefly discuss.
26. Can the U.S. Postal Service be considered a monopoly in first-class mail? Why or why not? What has happened to the price elasticity of demand for first-class mail in recent years? Briefly discuss.
27. Explain why the marginal revenue curve for a monopolist lies below its demand curve, rather than coinciding with the demand curve, as is the case for a perfectly competitive firm. Is it ever possible for a monopolist’s marginal revenue curve to coincide with its demand curve?
28. Why would a monopoly firm never knowingly produce on
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Prior to the American Era of Industrialization, the American Civil War had just taken place that gave the Northern Economy war profits that were eventually invested into industrialization. However, the Age of Industry, in the United States, was extremely harmful to the nation, due to the fact that the idea of Social Darwinism arose, there was corruption within the government, and monopolies began arising which had a negative effect on the the economy and the working class. Monopolies, in the industrial period, had a negative impact across the nation due to the fact that monopolies made life difficult for the arising middle class, economically speaking. Document 1 illustrates perfectly how monopolies made life difficult for the working class
5.(Market Structures) Determine whether each of the following is a characteristic of perfect competition, monopolistic competition, oligopoly, and/or monopoly:
Since a monopoly is the only seller of a good in the market, the demand curve is the market demand curve. Therefore a monopoly has a downward sloping demand curve, in contrast to the horizontal sloping demand curve of a firm in a competitive market (Mankiw, 2014). Monopolies aim to find the profit-maximizing price for its product. If a firm is initially producing at a low level of output, marginal revenue exceeds marginal costs (Mankiw, 2014). Every time production increases by one unit, the marginal revenue increases again and is greater than marginal costs (Mankiw, 2014). Therefore
The third chapter included many different economic principles. These principles include fixed and variable costs of production, supply, demand, and equilibrium price, the effect of technological change on the market for goods and services, conflicting incentives, and the formation and operation of a regional monopoly. In the capitalist society that we live in, competition will drive down the price of goods. If too many people are starting to join a gang and sell drugs, then there are more drug dealers to compete with for business, resulting in a decrease in profits for each dealer.
(7) A monopolist can discriminate prices for his product, a firm working under perfect competition cannot. The monopolist will be increasing his total profit by price discrimination if he find? Elastic ties of demand are different in different markets.
In the short run the perfect competition equilibrium can be found by graphing the marginal cost (MC), average total cost (ATC) and marginal revenue (MR) curves. In perfect competition the price is equal to the average revenue, which is equal to the marginal revenue and these are all constant, giving an infinitely elastic demand curve for the firm. The demand curve is “perfectly price elastic” due to the homogeneity of the products supplied, where each supplier, as a price taker, must focus on a single price. Given this, the only choice a supplier has in the short run is how much to produce. For profit maximisation to occur marginal costs (supply curve) must equal marginal revenue (demand curve). Profit maximisation is assumed to mean the maximisation of normal economic profit (i.e. revenue that covers the
Perfect competition: in this competition, no participant dominates the market thus; no specific seller has the power to set the prices of homogeneous goods. This therefore makes the conditions of a perfect competitive market stricter than the rest of the market structures. In this market, AT&T should be willing to sell their services in a certain price that reciprocates to their demand to maximize profits.
This chapter sets out the rationale for price discrimination and discusses the two major forms of price discrimination. It then considers the welfare effects and antitrust implications of price discrimination.