46 a) Consider a monopoly with the demand curve and marginal cost curve as shown in thefollowing diagram.MCQSuppose the monopolistic firm is earning positive economic profit. Explain clearly withnecessary illustrations using this diagram how each of the following governmentinterventions will affect the market equilibrium, consumer surplus, producer surplus anddeadweight loss.) The government imposes a lump-sum tax on its output.(i) The government imposes a per-unit tax on its output.b) Suppose the purpose of the government interventions in (a) is to increase consumer surplusand reduce deadweight loss. Based on your answers to (a), explain whether these policies willbe effective.

Meaning of Monopoly: The term monopoly refers to the situation under which there is only an…

Answered: 4.6 a) Consider a monopoly with the…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 32P: Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the...

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Similar questions

How does the demand curve perceived by a monopolist compare with the market demand curve?
Why does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers?
Why are urban areas willing to subsidize urban transit systems? Does the argument for subsidies make sense to you?
What are some of the benefits of the deregulation?
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. 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. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
Classify the following as a government-enforced barrier to entry, a banker to entry that is not government-enforced, or a situation that does not involve a barrier to entry. A patented invention A popular but easily copied restaurant recipe An industry where economies of scale are very small compared to the size of demand in the market A well-established reputation for slashing prices in response to new entry A well-respected brand name that has been carefully built up over many years
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Why would a firm choose to use one or more of the anticompetitive practices described in Regulating Anticompetitive Behavior?
If the transit system were regulated to operate with no subsidy (i.e., at zero economic profit), what approximate output would it supply and what approximate price would it charge?

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