EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9780100605930
Author: Blinder
Publisher: YUZU
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Chapter 13, Problem 13DQ
To determine
The
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Monopoly: Work It Out
Earlier we mentioned the special case of a monopoly where MC = 0. Let’s find the firm’s best choice when more goods can be produced at no extra cost. Since so much e‑commerce is close to this model—where the fixed cost of inventing the product and satisfying government regulators is the only cost that matters—the MC = 0 case will be more important in the future than it was in the past. For each demand curve, calculate the profit-maximizing level of output and price as well as the monopolist's profit.
a. ?=200−?P=200−Q, fixed cost = 1,000.
Profit‑maximizing output Q =
Profit‑maximizing price P = $
Monopolist's profit: $
b. ?=4,000−?P=4,000−Q, fixed cost = 900,000 (Driving the point home from part a)
Profit‑maximizing output Q =
Profit‑maximizing price P = $
Monopolist's profit: $
c. ?=120−12?P=120−12Q, fixed cost = 1,000…
The Justice Department sued several universities for collectively setting the size of scholarships offered. Explain why the alleged price fixing on the part of universities might be harmful to students.
Is the creation of a monopoly power due to the absence of government intervention in the market? If so why
Chapter 13 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- Explain how a market dominated by a monopoly firm can harm or benefit the public interest. Provide an example to support your claim.arrow_forwardIn many large U.S. cities, monopoly owners of sports franchises have been lobbying local governments for new publicly financed sports stadiums. Is this a form of rent seeking? - Is there convincing evidence of rent seeking? - How does that relate to the welfare cost of monopoly?arrow_forwardDoes a monopolist have a supply curve? Explain your answer. What are the different types of price discrimination? Differentiate between an oligopoly and a monopolistic competition (i.e. number of firms and the degree of product differentiation). How are skilled and unskilled workers in an economy likely to be affected if the firms adopt skill-biased technologies?arrow_forward
- At one time, PLDT had a great deal of monopoly power and earned large profits. The growth in the use of cellular technology caused PLDT to lose money. What happened to PLDT's monopoly power?arrow_forwardThe graph shows the relevant curves for a natural monopoly. Assume that in regulating this monopoly, policy makers have directed the firm to follow an average cost pricing rule, where there is a regulated fair-return price. What is the firm's profit? If the firm is losing money, express the loss as a negative number. Round to the nearest penny. Price ($) 36.9 31.6 25.9 22.6 18.5 16.7 15.2 11.7 10.3 Marginal revenue 11.1 16.5 29.5 Average cost Marginal cost Demand 37.5 Quantity $arrow_forwardA natural monopoly is most likely to occur in which of the following industries? Group of answer choices a. the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years b. the diamond mining and marketing industry because one firm can control a key resource c. the software industry because of the importance of network externalities d. an industry where fixed costs are very large relative to variable costsarrow_forward
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