This second question gets you to work through the efficiency implications of market power. As economists, we are not onlO interested in strategies that increase profits of firms but also the efficiency implications of various business strategies. Almost all business strategies work to increase profits by exploiting market power. Monopoly is the market structure in which the firm potentially has the most market power since there is only one firm serving the market. This question gets you to work though the cause of the inefficiency in a monopoly market. 2. Suppose the demand for Tasmanian apples is P(Q) = 100 – Q and the total cost of the apple orchard is TC(Q) = 30Q. (a) Use excel to plot demand and marginal revenue. Be sure to label allparts of the diagram including all intercepts. (b) On the same graph, plot marginal cost and average cost. I (c) Find the monopoly equilibrium. Illustrate these in your graph. d) Define consumer surplus and illustrate consumer surplus on yourgraph. (e) Illustrate on your graph the efficient level of apple production andexplain why this quantity is efficient. Illustrate consumer surplus under efficient production. () Explain what happens to the missing surplus between monopoly andefficient production.
This second question gets you to work through the efficiency implications of market power. As economists, we are not onlO interested in strategies that increase profits of firms but also the efficiency implications of various business strategies. Almost all business strategies work to increase profits by exploiting market power. Monopoly is the market structure in which the firm potentially has the most market power since there is only one firm serving the market. This question gets you to work though the cause of the inefficiency in a monopoly market. 2. Suppose the demand for Tasmanian apples is P(Q) = 100 – Q and the total cost of the apple orchard is TC(Q) = 30Q. (a) Use excel to plot demand and marginal revenue. Be sure to label allparts of the diagram including all intercepts. (b) On the same graph, plot marginal cost and average cost. I (c) Find the monopoly equilibrium. Illustrate these in your graph. d) Define consumer surplus and illustrate consumer surplus on yourgraph. (e) Illustrate on your graph the efficient level of apple production andexplain why this quantity is efficient. Illustrate consumer surplus under efficient production. () Explain what happens to the missing surplus between monopoly andefficient production.
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
Chapter12: Price And Output Determination: Oligopoly
Section: Chapter Questions
Problem 1E
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