Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 24, Problem 7CQ
To determine
High barriers to entry.
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Some economies are less healthy than they could be because both the market power and economic profit of some favored firms are protected by either government or some private force (e.g. mafia). Present a firm that has market power and is earning economic profit when it is maximizing profit. Explain how competition could help consumers by showing how the profit maximizing point for this firm might change, to the advantage of consumers, if competitors entered this market and competed against this firm.
Explain why firms would or would not worry about future competition in each market. Explain how this would impact each firms profits.
Identify two products that have either (a) fallen sharply in price or (b) gotten significantly better without price increases. How did these changes come about? Describe how society benefits from this type of market competition.
Chapter 24 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Competition and the Invisible Hand: End of Chapter Problem Let’s take a look at Invisible Hand Property 2 in action using a mathematical example. Suppose an industry is characterized by the following equations. We’re going to assume that all individual firms are identical to make this problem a little simpler. Demand: ??=100−2?QD=100−2P Individual firm's supply: ??=0.5+0.1?qS=0.5+0.1P Market supply with n firms: ??=?×??=0.5?+0.1??QS=n×qS=0.5n+0.1nP Individual firm's average cost: ??=5??−5+24.2??AC=5qS−5+24.2qS a. Suppose 24 firms are in this industry. What is the equation for market supply? QS =arrow_forwardTrue or false b. Charging a price greater than marginal cost leads to maximum efficiency c. In reality, few markets are perfectly competitive, and some loss of economic efficiency occurs in most markets d. Most markets are perfectly competitive and economists have found that there is no loss of economic efficiency in the U.S. economy.arrow_forwardWhat happens if the U.S. textile industry has high barriers to entry? a.) The textile industry’s amount of new firms eventually causes prices to drop. b.) The textile industry’s high profits will attract new firms to enter. c.) The textile industry’s surviving companies earn a normal level of profit over the long run. d.) The textile industry creates blocked avenues to entry even with companies earning top profits.arrow_forward
- Give typing answer with explanation and conclusion Sort the following characteristics by whether they describe competitive markets, firms that can perfectly price-discriminate, both, or neither. maximize total surplus result in some deadweight loss zero economic profit in the long run eliminate consumer surplusarrow_forwardANSWER IF TRUE OR FALSE: no need for long explanation. 1. The welfare of the consumers is maximized under a purely competitive market. 2. It is easy to exit or stop production if the market condition is no longer profitable if there is very low investment in fixed assets. 3. Patents and copyrights serve as barriers in entering an industry and in competing against the already existing producers.arrow_forward4 Modern business practices do not usually result in violent outbreaks. Why might governments in the modern day enact laws or regulations that restrict competition? As an example, an entire profession-lobbyist-focuses on convincing government officials to pass laws and regulations beneficial to particular industries. Is this reasonable? Justify.arrow_forward
- Keep in mind the case study of Uber taxi industry. Analyze the competitive structure of the taxi market, as it existed in a representative major metropolitan market such as New York prior to the introduction of Uber? Where does economic power in the industry reside?arrow_forwardChoose a product or service that you are familiar with (something you use or have used, something related to a job you or someone close to you has held, etc.). Are there a lot or few firms in the industry? Are the products similar or identical or without close substitutes? Are there barriers to entry and, if so, what are they?arrow_forwardQ) In some countries, brand name fast-food restaurants are not allowed to operate. Such restrictions are likely to A. enhance the social welfare of society. B. increase the number of fast-food restaurants. C. reduce barriers to entry in imperfect markets. D. reduce the competitive nature of local fast-food markets.arrow_forward
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