Microeconomics with Connect Access Card
20th Edition
ISBN: 9781259278556
Author: Campbell McConnell
Publisher: McGraw-Hill Education
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Question
Chapter 19, Problem 2DQ
To determine
The Sherman and Clayton acts.
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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?
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?
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.
Chapter 19 Solutions
Microeconomics with Connect Access Card
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- 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.arrow_forward7) Without regulation, an industry that is a natural monopoly will tend to have:a. higher prices than is efficient, especially if demand is elastic.b. higher prices than is efficient, especially if demand is inelastic.C. higher consumpton than is efficient, especially if demand is elastic.d. higher consumption than is efficient, especially if demand is inelastic.arrow_forward3 1. Describe the bidding process by which the electricity generation sector provides electricity to pooling and balancing authorities. Additionally, show this process by building an electricity supply curve. a. What antitrust and regulation concerns are present at the wholesale stage of the electricity market? b. Describe a market design that reduces market manipulation in wholesale electricity markets. Show that the Nash equilibrium under this market design will result in generators bidding their true marginal cost of production. c. Describe a vertically integrated industry as it pertains to the electricity sector. d. Describe non-linear (two part) pricing as it pertains to retail electricity sales. What is the purpose of this pricing system?arrow_forward
- Question 3 A firm may be deemed a monopolist, even though it is not the only seller in a market, because what matters is size in relation to the market. True 5 pts O Falsearrow_forward4. Suppose this market has a single monopoly seller facing the entire market demand Q= 120 – 2P and cost curve C(Q)= 10Q. Now, Suppose the government imposes a unit tax of 4. a) What is the ad valorem tax which will generate the same quantity distortion? b) What is the tax revenue from the ad valorem tax calculated in part a? c) If the government’s objective is to reduce deadweight loss, should they implement a tax? d) If the government is going to implement either a unit tax of 4 or the ad valorem tax you calculated in part a., which one should they chose for the highest tax revenue?arrow_forwardThe courts have ruled that it is reasonable restraint of trade (and therefore permissible) for the owner of a business to sell his business & a contract with the new owner saying that he will not compete with her within a vicinity of, say, 100 miles , for a period of, five years. if this type of contract is a reasonable restraint of trade, you can give an example of what you would consider an unreasonable restraint of trade? explain how you decide what is a reasonable restraint of trade and what is not.arrow_forward
- 1.Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) a Kansas wheat farm; (d) the commercial bank in which you or your family has an account; (e) the automobile industry. In each case, justify your classification. LO1arrow_forwardDescribe the major provisions of the Sherman and Clayton acts. What government entities are responsible for enforcing those laws? Are firms permitted to initiate antitrust suits on their own against other firms?arrow_forward5. (a) Assume that two firms A and B are in different industries (like computer software and computer hardware). What impact will a merger between these two firms have on the number of firms in each industry after the merger? Please give an explanation. (b) Current automobile companies are facing a shortage of computers chips used in cars to run various parts of the car, and therefore supply of cars has decreased since a necessary part(s) is not available. If an auto company like General Motors (GM) decided to buy a chip manufacturing company to ensure that it did not face a chip shortage in the future, would such a purchase lead to more concentration in either the auto industry or the chip-manufacturing industry? Please give an explanationexplanation.arrow_forward
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