Principles of Microeconomics, Student Value Edition (12th Edition)
12th Edition
ISBN: 9780134069609
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 13, Problem 4.2P
To determine
Patronizing the locals and its benefits.
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Principles of Microeconomics, Student Value Edition (12th Edition)
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- Refer to Diagram 2 above, which represents a monopolist firm, to answer the following questions. product = marginal product x selling price per unit). What quantity will this firm produce and what price will it charge? Suppose this monopolist firm becomes regulated and the regulatory agency wants to achieve economic efficiency. What price would the agency require the monopoly to charge and what quantity will the firm produce as a result? If the monopolist charges a price that will achieve economic efficiency, will the monopolist be making a profit or loss? Explain your answer with a calculation. Now suppose the government regulates the monopoly by imposing a price ceiling of $60. How many units will be produced? Will every customer who is willing to pay the ceiling price of $60 be able to buy the product? Explain why or why not. Based on the price ceiling of $60, what will be the profit of this monopolist?arrow_forwardIn perfectly competitive markets, there are so many firms that no one firm can influence price. If any of them try to raise their prices above their competitors’ prices, their customers simply switch and buy their competitors’ products. Monopolies are at the other end of the market spectrum. In a pure monopoly, there is only one firm that services the entire market. A pure monopolist can influence price by varying its level of output until it reaches the level of output that results in the highest level of profit for the firm. Please answer the following questions: What advantages do monopolies have for the economy? What disadvantages do monopolies have for the economy?arrow_forwardIf a firm is practicing third−degree price discrimination and is charging a price of $8 per unit to consumers in Group A and a price of $10 to consumers in Group B, which of the following is true? A. Group A consumers have a lower price elasticity than Group B consumers. B. Group B consumers have a greater price elasticity than Group A consumers. C. Group A consumers have a greater price elasticity than Group B consumers. D. Group A consumers are less responsive to price changes than Group B consumers.arrow_forward
- Why do some firms practice price discrimination? Relate your answer to the common practice of public colleges charging lower tuition to in-state students and higher tuition to out-of-state students.arrow_forwardIn terms of reality, could you show that it is easier for a firm to practice second-degree price discrimination than it is for a firm to practice first-degree price discrimination? If you can use a graph, that would help me understand thank you.arrow_forwardSmyth Industries operated as a monopolist for the past several years, earning annual profits amounting to $50 million, which it could have maintained if Jones Incorporated did not enter the market. The result of this increased competition is lower prices and lower profits; Smyth Industries now earns $10 million annually. The managers of Smyth Industries are trying to devise a plan to drive Jones Incorporated out of the market so Smyth can regain its monopoly position (and profit). One of Smyth's managers suggests pricing its product 50 percent below marginal cost for exactly one year. The estimated impact of such a move is a loss of $1 billion. Ignoring antitrust concerns, compute the present value of Smyth Industries' profits if it could have remained a monopoly when the interest rate was 5 percent. Multiple Choice $210 million $200 million $1.05 billion $100 millionarrow_forward
- In the following graphic, how much more will a 1st degree price discriminator make compared to a firm that changes to a firm that charges a single price?arrow_forwardStudent pricing at the movie theater is a common example of third degree price discrimination. What is it about students, as compared to everyone else, that makes movie theaters want or need to charge them a lower price? Why is it important for movie theaters to make students show their IDs? Additionally, suppose a student could buy as many tickets as they wanted with their ID. How might that limit the theater’s ability to charge two drastically different prices for students and non-students?arrow_forwardExplain why it is not possible for a monopoly firm to maximise its profits by charging a price in the price region where demand is inelastic, even though there are no direct substitutes for its product. Also explain how a monopoly will be able to charge a higher price than a firm producing the good under perfect, oligopolistic, or monopolistic competitionarrow_forward
- Judge Mark Griffiths finds that Moodle is a relentless and predatory monopolist. Judge Griffiths says that: Moodle established and maintained the Blackboard monopoly by using the "applications barrier to entry," which gives Moodle enduring monopoly power. Moodle harnesses independent software vendors to create products that take advantage of new application program interfaces (APIs) built into each release of Blackboard. Gives PC makers no choice but to install Blackboard, at whatever price Moodle decrees. Moodle maintains that it has sought only to innovate, serve customers, and protect its intellectual property. Moodle says that it is not a monopoly because: It competes with itself by continually releasing "new and improved" versions of Blackboard. Technological change will ensure that any dominance it enjoys is fragile. Already, "middleware" (applications like RealNetworks) have their own APIs, which new and existing applications might hook on to…arrow_forwardQ20 With regard to price discrimination, we can generally say that a monopolist practicing perfect price discrimination _____ a single-price monopolist in the same market. a. Produces the same output level and charges the same price as. b. Produces a lower level of output compared to. c. Generates more consumer surplus than. d. Generates a more efficient outcome for society as a whole compared to. e. Has the same effects on consumer welfare as.arrow_forwardDiscuss some products and markets that are good examples of Monopolistic Competition. Like the market structure of perfect competition, monopolistic competition assumes inexpensive entry into the market and thus many small sellers. Like the market structure of monopoly, monopolistic competition assumes a downward sloping demand curve. This is because, unlike the identical products found in perfectly competitive markets, the products in monopolistically competitive markets are differentiated and not perfect substitutes for one another. Therefore each monopolistically competitive seller has some degree of brand loyalty and would not lose all of its customers if it slightly raised its price above that of its competition. While not facing perfectly elastic, or horizontal, demand, the monopolistically competitive firm still faces a more elastic demand than the monopolist, whose product has no substitutes. Give two examples of markets where there are many choices among products, yet we…arrow_forward
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