Consider the weekly market for gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitiveequilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors actas price takers and each individual vendor has no market power.The following graph displays the supply (S = MC) and demand (D) curves in the weekly market for gyros.Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition.Competitive Market4.0S-MC3530X2.01.51.0+20 30PRICE (Dollars per gyra)5.00.5RICE (Dollars per gyro)05.04.54.03.53.02.5Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in theneighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change doesnot affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. Thefollowing graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for themonopoly vendor,2.0Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist.(?)151.00.510001040 50 60 7020QUANTITY (Gyros)30MonopolyCompetitiveMonopolyMCMR401 50 60 70QUANTITY (Gyros)80D+90 100PriceMarket Structure (Dollars)+DQuantity(Gyros)PC Outcome90 100(?+Consider the welfare effects that result from the industry operating as a competitive market versus a monopoly.Monopoly CutcomeOn the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by amonopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody.Deadweight LossDeadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitiveoutcome.In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity thatwould be chosen if a monopolist controlled this market.Given the summary table of the two different market structures, you can infer that, in general, the price is lower under aand the quantity is higher under a

A monopoly is a market structure when there is only one seller present. Due to the lack of a close…

Answered: e monopolist.

Business

Economics

e monopolist.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and…
When the number of competing firms is small in a market, is this market necessarily different from a perfectly competitive market in terms of market power and efficiency? Develop your in-depth analysis and argument on the basis of relevant economic theory or models. Also discuss and explain how market power can empirically and practically (from a competition policy point of view) be assessed.
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