ECONOMICS - UPDATED
20th Edition
ISBN: 9781259795862
Author: McConnell
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Question
Chapter 21, Problem 1RQ
To determine
Whether the statement is true or false about the monopoly .
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[Q: 11-4660750j Consider a monopoly that faces an inverse demand curve with a constant elasticity, p(Q) = Q°, and that has a constant marginal cost, MC(Q) = m.
If the own-price elasticity is e = - 6.9, marginal costs are m=7, and the government imposes a specific tax on the monopolist, what will be the tax incidence on consumers?
O A. 65.42%
O B. 38.1%
OC. the same incidence as when the tax is imposed on a perfectly competitive firm.
O D. 50%
O E. 116.95%
Industry
Alpha
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The table shows market shares of...
1
30
80
25
20
Market Share of Firms in Industry
3
5
20
5
Multiple Choice
Alpha
2
30
10
Beta
5
25
20
225
20
4
20
3
25
20
0
1
0
10
The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among
them. Those who focus on monopoly structure would most likely assert that there is a violation of antitrust law in which industry?
6
OL
0
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0
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for
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00:09:48
Resale price maintenance can prevent showrooming.
True
False
In a successive monopoly structure, if distributor has a constant marginal cost of $5 and is paying the producer $12 per unit, which is the profit-maximizing wholesale price, what is the distributor's marginal revenue at this output level?
$17
$12
$7
$5
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- 500 450 400 出350 300 250 是 200 150 LRAC 100 MC 50 MR 3 4 Quantity (hundreds of trips per month) If a marginal cost pricing rule is imposed on the single-price natural monopoly in the figure above, then the deadweight loss will be per month. If a marginal cost pricing rule is imposed on the single-price natural monopoly in the figure above, then the deadweight loss will be per month. $20,000 O so $40,000 O$80,000 $45,000 $5,000 Price and costs (dollars per trip)arrow_forwardPrice (dollars per unit) 30 24 21 18 16 12 O 4 $12 to $18. $18 to $24. $12 to $18. a $12 to $24. 8 MR b 12 LRAC (inflated) LRAC MC In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make the regulator believe its costs are LRAC (inflated), then the price the firm charges will increase from D₁ 20 16 Quantity (millions)arrow_forwardFigure: Monopoly Profits 2 P. 18 16 14 12 10 6. MC = AC MR 0 20 40 60 80 100 120 140 160 180 Q What is the consumer surplus at the monopolist profit-maximizing output and price? O $245 $630 O $315 $280 4. 2)arrow_forward
- 10. Questionable business practices according to antitrust agencies Complete the following table by matching each of the scenarios to the concept of resale price maintenance, predatory pricing, or tying. Predatory Pricing Scenario SnapFace is a firm that manufactures polaroid cameras. Suppose SnapFace sells its polaroid cameras to online retailers for $159 each and requires those online retailers to charge at least $179 to shoppers for each polaroid camera. Breezy Hut is the only firm producing air conditioners. It costs $1,000 to produce one air conditioner, and Breezy Hut sells each air conditioner for $1,200. After Gregale, a new firm with the same costs as Breezy Hut, enters the market for air conditioners, Breezy Hut starts selling its air conditioners for a price of $550. Wally's sells a wide variety of skateboards to retail sporting good outlets. Wally's recently rolled out two new skateboards: a popular Dallas II and a much less popular Drydeck 3. Wally's requires sporting good…arrow_forwardAll information given: Computer software S and hardware H are complementary products used to produce computer services. Customers make a one-time purchase of hardware but buy various amounts of software. The market for software is perfectly competitive whereas there is a single monopoly firm, HAL, selling hardware. Demand for software services is given by Q=18-p for a high demand consumer and Q-12-p for a low demand consumer. Suppose that there are 500 high demand consumers and 1000 low demand consumers. The marginal cost of producing software is $2 whereas the marginal cost of producing hardware is $50. (a) What price will HAL set for hardware faced with a perfectly competitive software market? (b) Can HAL do better by branding software and only allowing its hardware to use its own software if it sells software and hardware separately and offers one price for each. (c) Can HAL do better if it offers a different branding and pricing strategy? Suppose that you are a consultant and are…arrow_forwardSuppose that two identical firms are Cournot competitors. Industry demand is given by: p= 200 – q. - 42 where q and q2 are the outputs of Firm 1 and Firm 2 respectively. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20. Find the output quantity for each frm. 10 O 20 40 O 60 D Question 16 For the information in the above question, Find the output price. 70 50 90 100arrow_forward
- 3. Consider a market in which a monopolist would charge at a price of $10 for a particular good. Assume now the market is currently dominated by a pair of Bertrand duopolists who produce identical goods and compete on price in a one-shot game. They both face a marginal cost of $5. They start with colluding and agreeing to charge the monopoly price of $10 in an effort to maximize their profits. In equilibrium, the market price of the good will be.... (a) Over $10 (b) $10 (c) Between $5 and $10 (d) $5 (e) Less than $5 (f) None of the above Answer: 3d. A price war will break out, lowering the price to $5.arrow_forwardQuestion 35 (Table: Three-Country Oil Production) Refer to the table. Suppose that three countries are engaged in oil production. For simplicity, assume zero costs so that revenue equals profit. Assume that country A cheats on the cartel agreement by producing 200 more barrels than the other two countries. What is the resultant profit earned by country A? Market Price 6,000 Total Market Output 600 800 1,000 1,200 1,400 1,600 1,800 O 24,000 O 30,000 O 70,000 90 80 70 60 50 40 30arrow_forwardAn industry with only one producer has a demand curve of P = 90-Q, with price in dollars and quantity in thousands. The monopolist's marginal cost curve is MC = 30 + 2Q. What is the deadweight loss of monopoly in this industry? O $100,000 O $37,500 O $72,667 $50,000arrow_forward
- The antitrust act that says, "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal" is the Federal Trade Commission Act. O Sherman Act. O Clayton Act. Robinson-Patman Act.arrow_forwardPrice and cost (dollars per unit) 50.00 40.00 S=MC 30.00 20.00- 10.00. MR D. 100 200 300 400 500 Quantity (units per hour) In the above figure, a monopoly should charge $ for its output when maximizing profit. O $10 $20 $30 $40 O $50arrow_forward1. The widget Industry in Anytown is a monopoly, controlled by Widget Corp. Its demand curve for the local market is given by P = 800 – 20 W Where W represents the number of widgets sold per period. The total cost function (including opportunity or implicit costs) for Widget Corp. is TC = 300 + 500 W + 10 W2 a. Assuming the industry is unregulated, what are the equilibrium price and output and economic profits earned by Widget Corp.? b. If the industry is regulated and the regulatory authority forces Widget Corp. to earn only a normal return on investment (which is included in its cost function), what is the resulting equilibrium price and quantity? c. What happens to consumer surplus? What happens t o the economic profits earned by Widget Corp.?arrow_forward
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