The graph illustrates a monopoly with constant marginal cost and zero fixed cost. Place the shapes on the graph to show the profits and deadweight loss (DWL) for this firm. 18 17 Profits 16 15 DWL 14 13 12 11 10 в 4 MC -1 MR -2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity Price (S)

The graph illustrates a monopoly with constant marginal cost and zero fixed cost. Place the shapes on the graph to show the profits and deadweight loss (DWL) for this firm. 18 17 Profits 16 15 DWL 14 13 12 11 10 в 4 MC -1 MR -2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity Price (S)

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 30CTQ: If a monopoly firm is earning profits, how much would you expect these profits to be diminished by...

See similar textbooks

Similar questions

In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?
What is a legal monopoly?
How does the demand curve perceived by a monopolist compare with the market demand curve?
What is a natural monopoly?
What is deregulation? Name some industries that have been deregulated in the United States.
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
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?
How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive film?
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.)
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?
If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?
Is a monopolist allocatively efficient? Why or why not?