MICROECONOMICS W/CONNECT >IC<
MICROECONOMICS W/CONNECT >IC<
20th Edition
ISBN: 9781259890031
Author: McConnell
Publisher: MCG
Question
Chapter 19, Problem 1DQ
To determine

Antitrust policy and industrial regulation approach towards monopoly.

Expert Solution & Answer
Check Mark

Explanation of Solution

In order to achieve efficiency, the government promotes competition in a market economy. The antitrust laws are used to maintain competition and preventing firms to create higher power in the process of creating monopoly. So, they use mergers or they take necessary action against the firms that misuse their power of being a monopoly.

The industrial regulation is used mainly in the cases of a natural monopoly. Here, the government will analyze the industry structure, the firm’s cost structure, the impact on the consumers and competitors due to the firm’s actions, technology used in the industry and the probability of a new competitor entering the industry and then regulate their operations.

Economics Concept Introduction

Concept Introduction

Monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers.  The firms have full control over the market. The price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
As the manager of a monopoly, you face potential government regulation. Your inversedemand is P = 40 − 2Q, and your costs are C(Q) = 8Q. (LO1, LO2, LO6)a. Determine the monopoly price and output.
6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5) a. Determine the profit-maximizing output and price. b. What price and output would prevail if this firm’s product were sold by price-taking firms in a perfectly competitive market? c. Calculate the deadweight loss of this monopoly. 8. The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2. (LO8) a. Determine the firm’s optimal advertising-to-sales ratio. b. If the firm’s revenues are $40,000, what is its profit-maximizing level of advertising?
Use the accompanying graph to answer the questions that follow. (LO1, LO2) a. Suppose this monopolist is unregulated. (1) What price will the firm charge to maximize its profits? (2) What is the level of consumer surplus at this price? b. Suppose the firm’s price is regulated at $80. (1) What is the firm’s marginal revenue if it produces 7 units? (2) If the firm is able to cover its variable costs at the regulated price, how much output will the firm produce in the short run to maximize its profits? (3) In the long run, how much output will this firm produce if the price remains regulated at $80?
Knowledge Booster
Similar questions
  • 4. You are the manager of a monopoly, and your demand and cost functions are given by P = 300 − 3Q and C(Q) = 1,500 + 2Q2, respectively. (LO3, LO4) a. What price–quantity combination maximizes your firm’s profits? b. Calculate the maximum profits. c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price–quantity combination? d. What price–quantity combination maximizes revenue? e. Calculate the maximum revenues. f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price–quantity combination? 6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5) a. Determine the profit-maximizing output and price. b. What price and output would prevail if this firm’s product were sold by price-taking firms in a perfectly competitive market? c. Calculate the deadweight loss of this monopoly. 8. The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2.…
    Reference: Ref 11-2   (Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC'. Suppose further that after the innovation reduced the cost to ATC', it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be: a. $1,190. b. $3,400. c. $1,700. d. $3,060. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
    Suppose two firms compete in quantities (Cournot) in a market in which demand is described by: P=260-2Q. each firm incurs no fixed cost but has a marginal cost of 20. Now imagine they collude to produce the monopoly output.   Suppose that after the cartel is established, firm 1 decides to cheat on the collusion, assuming the other firm will continue to produce its half of the monopoly output.   What will be firm 1's profit if firm 2 continues producing the monopoly outcome? a. 4500 b. 5200 c.4200 d. 4050 Should firm 2 respond and increas their quantity? Yes or No
  • Suppose that demand for a particular style of handmade Rwandan baskets is Qd = 1700 – 10P. Each basket maker has the following cost function: TCi = 1000 + 50 qi + .1 qi^2. Given this information, find the market outcomes under the various market structures below Multiplant monopoly. Suppose that a local entrepreneur decides to form a single monopoly by acquiring all the firms from part b and operating them as a single company (Each basket maker will still produce using the same cost function, but all the output will be marketed centrally). Now, how much output is produced at each plant (that is, by each basket maker), and how much by the firm as a whole? What is the monopoly price? What is the monopolist’s profit or loss per plant? What is the firm’s overall profit or loss for all 10 plants together? What is MCi and ATCi? What is MR?
    16-1 Newspaper Bargaining Two equal-sized newspapers have an overlap in circulation of 10% (10% of the subscribers subscribe to both newspapers). Advertisers are willing to pay $10 to advertise in one newspaper but only $19 to advertise in both, because they’re unwilling to pay twice to reach the same subscribers. What’s the likely bargaining negotiation outcome if the advertisers bargain by telling each newspaper that they’re going to reach an agreement with the other newspaper, so the gains to reaching agreement are only $9? Suppose the two newspapers merge. What is the likely post-merger bargaining outcome? these would be most advantageous from a bargaining position?
      11 21. Imagine an  N  firm oligopoly for "nominally  differentiated"  goods. That  is,  each  of  the  N  firms  produces  a product  that  "looks"  different from the products  of  its competitors, but that  "really" isn&#39;t any different. However, each firm is able to fool some of the buying public.  Specifically, each of  the  N  firms  (which  are identical and have zero marginal  cost of production)  has  a captive market -consumers who will buy only from that firm. The demand generated by each of these captive markets is given by the demand function  Pn     A- Xn , where Xn  is the amount supplied to this captive market and  Pn  is the price of the production of firm n. There is also a group of intelligent consumers who realize that the products  are really undifferentiated.  These…
  • Indicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. Answer 1 & 2 1. If a monopsonist faces a perfectly elastic supply curve, there will be no deadweightloss relative to the competitive outcome 2. In a Cournot duopoly market, the two firms agree to produce half of the monopolyoutput level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.
    Draw the demand curve, marginal revenue, and marginal cost curves from Figure : , and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose the demand for the monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. What do you think about the result? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
    Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are:  Q1 = 300 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.4P3 and Q4 = 75 – 0.25P4.  Assume further that the total cost of the firm is given as TC = 61,000 – 100Q. As an economic adviser you are required to determine: a.      The prices to be charged in the four markets and the amount of output to be sold in each market so that total profits can be maximized.  b.     Calculate the total profit to be made from the strategy of price discrimination. c.      Elasticities in each market and comment.
  • 9-2 Distinguish marginal revenue and average revenue for a monopolist and explain why marginal revenue is less than average revenue3. (Monopoly) Suppose that a certain manufacturer has a monopoly on the sorority and fraternity ring business (a constant-cost industry) because it has persuaded the “Greeks” to give it exclusive rights to their insignia.a. Using demand and cost curves, draw a diagram depict- ing the firm’s profit-maximizing price and output level. b. Whyismarginalrevenuelessthanthepriceforthisfirm? c. On your diagram, show the deadweight loss that occurs because the output level is determined by a monopolyrather than by a competitive market. d. What would happen to price and output if the Greeksdecided to charge the manufacturer a royalty fee of $3 per ring?
    Assume a monopolist produces rum and knows there are two groups of rum consumers, 1 and 2, with different price elasticities. Group 1 is highly price elastic with E1=-10; Group 2 exhibits a lower price elasticity of E2=-2.5. Assume the company can separate these two groups (e.g., by handing out special ID cards) and can charge two different prices. If P2=$14, how much can it charge to Group 1?
    Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompanies’ total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.
    • SEE MORE QUESTIONS
    Recommended textbooks for you
  • Microeconomic Theory
    Economics
    ISBN:9781337517942
    Author:NICHOLSON
    Publisher:Cengage
  • Microeconomic Theory
    Economics
    ISBN:9781337517942
    Author:NICHOLSON
    Publisher:Cengage