Which of these market structures is not correctly described? Monopolistic Competition Oligopoly Monopoly Control of Price by Firm Slight Varies Strong Product Characteristic Differentiated Differentiated 1 or 2 No.of firms Many small Few Small One None of the Choices Oligopoly Monopolistic competition Monopoly O At least 2 of the choices
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- 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?Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not?What is the relationship between product differentiation and monopolistic competition?
- For each of the fo llowing characteristics, say whetherit descriOOs a monopoly firm, a monopolisticallycompetitive lirm, both, or neither.a. laces a downward ..sloping demand cut\'eb. has marginal revenue Jess than pricec. laces the entry ol new firms selling: similarproductsd. earns economic profit in the long: rune. equat~ marginal revenue and marginal costf. produces the socially efficient quantity of outputSuppose that the market for e-readers is an oligopoly controlled by Amazon.com , Barnes and Noble,Sony, and Apple. Barnes and Noble is consideringincreasing its output. How would this affect themarket price? How would it affect the profits ofeach company?Many schemes for price discrintination involve somecosL For example, discount coupons take up the timeand resources of both the buyer and the seller. Thisquestion considers the implications of costly pricediscrimination. To keep things simple, let's assumethat our monopolist's production costs arc simplyproportional to output so that average total cost andmarginal cost arc constant and equal to each other.CHAPTER 15 MONOPOLY 317a. Draw the cost., demand, and marginal-revenuecurves for the monopolist. Show the pricethe monopolist would charge without pricediscrimination.b. ln your diagram, mark the area equal to the mernopolist's prolit and call it X. Mark the area equalto consumer surplus and call it Y. Mark the areaequal to the deadweight loss and call it Z.c. Now suppose that the monopolist can perfectlyprice discriminate. What is the monopolist'sprofit? (Give your answer in terms of X, Y, and Z.)d. What is the change in the monopolist's prolit fromprice discrimination? What is the…
- Two firms dominate the market for surgical sutures and competeaggressively with respect to research and development. The followingpayoff table depicts the profit implications of their different R&Dstrategies.a. Suppose that no communication is possible between the firms; eachmust choose its R&D strategy independently of the other. Whatactions will the firms take, and what is the outcome?b. If the firms can communicate before setting their R&D strategies,what outcome will occur? Explain.Firm B’s R&D SpendingLow Medium HighLow 8, 11 6, 12 5, 14Firm A’s R&D Medium 12, 9 8, 10 6, 8 SpendingHigh 11, 6 10, 8 4, 6Suppose Clomper's is a monopolst that manuractures and sels stampen, an extremely trendy shoe brand with na close substutes. The followng graph shows the market demand and marginal revenue ( MR ) ourves Clomper's taces, as wall as ins marginal cost ( MC ) , which is constant at $ 3 0 per pair of Stompers. For simplicty, assume that hxed costs are equal to zero; this, combined wah the fact that Clampers marginal cost is constant, means that its marginal cost curve is also equal to the average total cost ( ATC ) ourve. Trs , suppose that Compers camnct price discriminate. That is , it must darpe each consumer the same price for Stompers regardess of the consumer's wilingness and ability to pay. symod ) to shade une pronc, une green pants ( crange symbol ) to shade che consumer surpus, and the black points ( pius symood ) to shade the Suppope now that Clomper's is able to pertecty prico discriminate - that is , it knows cach corsumer's willingness to pay for a pair ar…1.ALCOA does not have the monopoly power it oncehad. How do you suppose their barriers to entry wereweakened? 2.For many years, the Justice Department has triedto break up large firms like IBM, Microsoft, and mostrecently Google, on the grounds that their large marketshare made them essentially monopolies. In a globalmarket, where U.S. firms compete with firms from othercountries, would this policy make the same sense as itmight in a purely domestic context?
- part 9 10 11 9. How doesthe price and output of a monopolist differ from thatofthe perfectly competitive A:industry? i.10. Whatportion of the consumer surplusin the competitive situation wastransferredto the firm inthe monopoly situation?11. How does a monopoly affect consumersurplus? Is this good or bad?Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1. a. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.b. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.c. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.Consider any market that has a demand curve given by: Qd = 240 - 2P. Where Qd is the total quantity demanded in the market, given in millions of units and P is the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market with Cmg = CVme = 15 and fixed monthly costs equal to 1,400. About this market, ask yourself: a) What is the profit of each of the oligopolists? b) Imagine that one of the companies managed to implement a process innovation capable of halving its Cmg and CVme, so that they would go from 15 to 7.5. This investment implies an additional monthly expense of $1,800. Discuss the statement: "If this situation occurs, the innovative company will not implement variable cost reduction, as the quantity supplied in the market will increase very little; prices will remain very close to what they are today and its profits will not increase"