Principles of Microeconomics California Edition 2nd Edition
2nd Edition
ISBN: 9780393622089
Author: Dirk Mateer, Lee Coppock
Publisher: W. W. Norton
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Question
Chapter 12, Problem 6QR
To determine
Demand curve of
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Suppose you operate in a monopoly environment and you set your price in order to achieve maximum profits. Is your demand elastic, unitary elastic, or inelastic? Does your answer change if you were in a monopolistically competitive market? What happens to the elasticity when you go from a monopolistic market to a monopolistically competitive one? Explain and give an example.
When oil prices increased 10 fold during the 1973 – 80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy?
If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Chapter 12 Solutions
Principles of Microeconomics California Edition 2nd Edition
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- How is the perceived demand curve for a monopolistically competitive firm different from the perceived demand curve for a monopoly or a perfectly competitive firm? Why?arrow_forwardSuppose you manage a local grocery store, and you learn that a very popular national grocery chain is about to open a store just a few miles away. Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). What will happen to your profits? Explain your reasoning in detail. How and why do profits change? What could you do to defend your market share against the new store?arrow_forwardwhat market inefficiencies derive from monopolies and monopolistic competition?arrow_forward
- Provide some examples of goods/services you buy from a highly competitive market and some examples of goods/services you buy from a monopolistic market. Discuss why some markets are highly competitive and other markets are not (such as a monopoly).arrow_forwardWhat is the relationship between product differentiation and monopolistic competition? Or is there a relationship. Why?arrow_forwardAside from advertising, how can monopolistically competitive firms increase demand for their products?arrow_forward
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