MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 7, Problem 8CACQ
To determine
To explain: Whether this industry conforms to a
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We’ve observed that there are few examples of perfectly competitive markets in the real world, yet we use the model of perfect competition as a comparison with other market structures. Can you think of any examples of monopoly in the real world?Describe something you believe could possibly called a monopoly and explain why it fits the characteristics of a monopoly.
Is your example a true, unregulated monopoly? (For example, Microsoft has been called a monopoly, but it is not the sole producer of computer operating systems, so strictly speaking it’s not a monopoly.)
If there are few true monopolies, what can we learn from studying that market structure?
Consider a firm that operates in a market that competes aggressively in prices. Due to the high fixed cost of obtaining the technology associated with entering this market, only a limited number of other firms exist. Furthermore, over 70 percent of the products sold in this market are protected by patents for the next eight years. Does this industry conform to an economist’s definition of a perfectly competitive market?
Suppose that the price of corn, a crop produced in a perfectly (or purely) competitive industry, increased 208% last year as demand for corn‑based ethanol fuel increased.
What do you expect to happen in the long run for the corn industry given this recent success?
A. The price per bushel of corn will continue to increase, yielding higher profits. Thus, more firms will enter the market indefinitely.
B. Profits will become negative due to overfarming, which will result in the corn farming industry going under.
C. Profits will be equal to zero.
D. None of the above.
Suppose the firms in the market for bacon, also a perfectly (or purely) competitive industry, experienced losses last quarter due to people becoming increasingly concerned about how high-fat diets negatively impact health.
What do you expect to happen in the long run for the bacon industry?
A. Seeing this as an opportunity to monopolize a fledging industry, firms will enter the industry, shifting…
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