Analytical Questions 1) What are the five major reasons for government involvement in a market economy? 2) A function of government is to regulate "natural monopolies." Explain what is a natural monopoly and why it requires government regulation.
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Analytical Questions
1) What are the five major reasons for government involvement in a market economy?
2) A function of government is to regulate "natural monopolies." Explain what is a natural monopoly and why it requires government regulation.
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- Question 4: The main criticism that economists have about monopolies is that a monopoly produces too little output and charges too high a price compared to a competitive market. The chart below shows a hypothetical monopoly's Marginal Cost (MC) and Marginal Revenue (MR) curves as well as the market demand (D) curve. AC MC 100 75 50 100 200 a) What is the quantity produced and price paid in this market if the monopoly seeks to maximize profits? (B) What will be the profits made by the monopoly in this situation? (C) Where do economists say would be the socially optimal level of production?| (D) instead of producing at the level that maximizes social welfare? Calculate the deadweight loss if the monopoly produces where it maximizes total profitsQuestion 4 A monopoly can be recognized by certain characteristics that set it aside from the other market structures. Explain why a monopoly firm is a price-maker in i. microeconomics. The opponent of monopoly argued that the monopoly power will result to a social cost. Explain why. i. A perfectly competitive market has the opposite characteristics or conditions from the monopoly market, describe THREE (3) characteristics or conditions of the perfectly Competitive market structure. iii.For a monopoly, why is marginal revenue less than price? Question 2 options: a) If a monopoly wishes to increase sales, it must lower the price to all customers, and the impact of the price effect, working with the quantity effect causes marginal revenue to be less than price. b) If a monopoly wishes to increase sales, it must raise the price to all customers, and the impact of the price effect causes marginal revenue to be less than price. c) If a monopoly wishes to increase sales, it must lower the price to all customers, and the impact of the quantity effect causes marginal revenue to be less than price. d) If a monopoly wishes to increase sales, it must raise the price to all customers, and the impact of the price effect, working with the quantity effect causes marginal revenue to be less than price. e) If a monopoly wishes to increase sales, it must lower the…
- Question 4 i. ii. iii. A monopoly can be recognized by certain characteristics that set it aside from the other market structures. Explain why a monopoly firm is a price-maker in microeconomics. The opponent of monopoly argued that the monopoly power will result to a social cost. Explain why. A perfectly competitive market has the opposite characteristics or conditions from the monopoly market, describe THREE (3) characteristics or conditions of the perfectly Competitive market structure.i A monopoly can be identified by a few traits that distinguish it from other market systems. Identify the reasons a monopoly firm sets prices in microeconomics. ii. Monopolistic opponents said that the monopoly power would have a negative social impact. Tell us why. iii Describe THREE (3) qualities or conditions of the perfectly Competitive market structure. A perfectly competitive market has the opposite characteristics or conditions from a monopolistic market.1. "Cost functions can be very important for determining the structure of a market." Discuss this analysis. Your answer should include: a) At least one diagram b) A discussion of economies of scale and what might generate these c) An explanation of when we might expect to see monopolies or competitive markets emerge.
- Question 4: Monopolists, Competition & Externalities The production of electricity creates a lot of pollution. Whether coal or natural gas is being burned to create electric power, there are severe negative externalities from the production and consumption of energy. 1. Will the price of electricity be higher or lower if it is produced by a single monopolist rather than in a perfectly competitive industry? Why? 2. Will the quantity of electricity consumed be higher or lower if it is produced by a single monopolist rather than in a perfectly competitive industry? Why? 3. Will the total negative externality caused by pollution created in the production and provision of electricity be higher or lower if electricity is produced by a single monopolist rather than in a perfectly competitive industry? Why? 4. Is Total Surplus (that is, Consumer Surplus plus Producer Surplus) higher or lower if electricity is produced by a single monopolist rather than in a perfectly competitive industry? Why?…Questions: 1A) If MU Café, which is a monopolistically competitive firm, is making a positive profit in the short run, why might this profit become zero in the long run? 1B) If MU Café wants to keep the profit positive in the long run, what can it do? Provide ONE suggestion and briefly explain. 1C) What externality problem do you expect in the market for plastic bags? How does the government correct the inefficiency of the market? Explain in detail and diagram.Question 3 (a)The cost of buying a new head office for a firm that sells oranges in a perfectly competitive market has increased by 2%. What will happen to the price of oranges and the profit maximising quantity of oranges as a result, and why? (b)Why might governments allow the creation of monopolies via patent protection, despite the other negative effects of monopolies? Kindly don't copy from ch*g as the answer is wrong.
- (a) If you are the owner of the only bookstore in a small town, do you have a monopoly? Explain. (b) Draw graph and explain the inefficiency of a monopoly firm such as public sector provision of electricity.Q5. The graph below represents a monopoly firm. Answer the questions below. ( a. Briefly explain three ways in which pricing can be set with a regulated monopoly and the intended objective of each pricing method.b. Based on the diagram, if this monopoly firm is unregulated, what will be its profit? Show your calculations.c. Based on the diagram, if this firm is regulated based on social interest theory, what will be its profit? Show and explain your calculations.d. Based on the diagram, if this monopoly is subject to rate of return regulation, what will be the new price, output and profit of the firm? Show your calculations with explanations.e. Based on the diagram, if this is a natural monopoly that is allowed to set its price, what will be the minimum it should set in order to make a profit or break even? Explain your answer.1. Do you believe that Netflix will become or is already a monopoly? What are some of the monopoly traits that would make you believe it will soon be or is already a monopoly? 2. In a competitive business environment, firms are said to be break-even in the long run. What does this exactly mean, why does it happen? Does this long-run break-even outcome apply to all market structures, and why?
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