LSC CUMBERLAND EC202 MICRO>PKG<
21st Edition
ISBN: 9781260586992
Author: McConnell
Publisher: MCG
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Chapter 21, Problem 2DQ
To determine
The Sherman and Clayton acts.
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Price (dollars per unit)
30
24
21
18
16
12
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4
$12 to $18.
$18 to $24.
$12 to $18.
a
$12 to $24.
8
MR
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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
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Quantity (millions)
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.
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.
Chapter 21 Solutions
LSC CUMBERLAND EC202 MICRO>PKG<
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- Question 14 of 30 What is a natural monopoly? A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward. A market in which there is only one firm. A monopoly resulting from one firm's exclusive ownership of a natural resource required to produce a good. O A monopoly that results from government issuing patents. Which of the firms is most likely to be a natural monopoly? O A firm that owns nearly all of the diamond mines in the world. A restaurant that is unable to practice price discrimination and must charge all consumers the same price. O Municipal Power Light, the local supplier of electricity. A pharmaceutical company that has the exclusive right to sell a patented drug. 46°F aarrow_forward500 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_forwardExhibit 9-4: A Monopoly Total Quantity Total Fixed Variable Price Demanded Cost Cost $100 $30 $0 90 1 $30 20 80 $30 48 70 3 $30 78 60 $30 110 50 $30 150 Refer to Exhibit 9-4. At an output level of 5 units, the monopolist earns a total profits of about O $100.00 O $102.00 O $82.00 OS70.00 %24 2. 4. 5.arrow_forward
- (Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company is a monopoly, how much producer surplus is there when the monopolist maximizes profit? Price, Costs, Marginal Revenue O $180 O $90 O $0 O $20 $100 90 80 70 60 50 40 30 20 10 0 MR 1 2 3 4 5 6 7 8 9 Quantity (Thousands of subscriptions)arrow_forwardSuppose that demand is Qlp)-2000-4p. Consider the marginal revenue curve of a monopolist who operates in this market. Assume that it is plotted on a two-axis graph in which the horizontal axis measures quantities and the vertical axis measures marginal revenue. What is the horizontal intercept of the marginal revenue curve? O 500 O 750 O 1000 O 2000 O 250arrow_forwardNatural Monopoly Regulation MC P2 АТС P1 D Q3 Q2 Q, Quantity Using the graph above, what price is charged if marginal-cost price regulation is imposed on the natural monopoly firm? O P3 Below P2 but above P3 O P1 D Below P3 but above P2 D P2 Pricearrow_forward
- 2. The following are the demand and total cost schedules for Company Town Water, a local monopoly: Output in Gallons Price per Gallon Total Cost 50,000 $0.28 $ 6,000 100,000 0.26 15,000 150,000 0.22 22,000 200,000 0.20 32,000 250,000 0.16 46,000 300,000 0.12 64,00 How much output will Company Town Water produce, and what price will it charge? Will it earn a profit? How much? (Hint: First compute the firm’s MR and MC…arrow_forward3. 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_forwardMarket Share of Firms in Industry 2 30 10 25 10 10 20 The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. A merger between Firm 2 and Firm 3 in Alpha would be a Industry Alpha Beta Kappa Delta 1 30 80 25 20 Select one: O a. conglomerate merger. O b. diagonal merger. O c. vertical merger. O d. horizontal merger. 32532 20 20 4 20 3 25 20 5 1 6 1arrow_forward
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