Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 9, Problem 22RQ
When a monopolist identifies its profit-maximizing quantity of output, how does it decide what
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Use the following words to fill in the blanks: price, price, economic profit, marginal benefit, greater, allocative efficiency, greater, total cost,
downward, reducing, marginal cost, beneath, increase.
A monopolist faces a
sloping demand curve.
production
If the marginal revenue exceeds the marginal cost, then a monopoly firm should
the market demand curve.
The marginal revenue curve for a monopolist always lies
The profit-maximizing choice for the monopoly will be to produce at the quantity where marginal reverne is equal to
its quantity of output.
If the firm produces where MC MR, and the firm can make higher profits by
The key difference with a perfectly competitive firm is that in the case of perfect competition, marginal revenue is equal to
while for a monopolist, marginal revenue is not equal to the
because changes in
quantity of output affect the price.
3.000
Draw a graph with linear demand and marginal curves and a horizontal MC curve. Find the monopolist’s profit-maximizing price (P*) and output (Q*). Now change the demand curve by rotating it clockwise (making it steeper) through the point (Q*, P*). What is the new profit-maximizing price and quantity? Is price higher or lower? Relate your answer to the fact that a monopolist does not have a supply curve
A monopolist is producing at a point where marginal cost exceeds marginal revenue. How should output be adjusted to increase profit?
Chapter 9 Solutions
Principles of Economics 2e
Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Suppose the local electrical utility, a legal...Ch. 9 - If Congress reduced the period of patent...Ch. 9 - Suppose demand for a monopolys product falls 50...Ch. 9 - Imagine a monopolist could charge a different...Ch. 9 - How is monopoly different from perfect...Ch. 9 - What is a barrier to entry? Give some examples.Ch. 9 - What is a natural monopoly?Ch. 9 - What is a legal monopoly?
Ch. 9 - What is predatory pricing?Ch. 9 - How is intellectual property different from other...Ch. 9 - What legal mechanisms protect intellectual...Ch. 9 - In what sense is a natural monopoly natural?Ch. 9 - How is the demand curve perceived by a perfectly...Ch. 9 - How does the demand curve perceived by a...Ch. 9 - Is a monopolist a price taker? Explain briefly.Ch. 9 - What is the usual shape of a total revenue curve...Ch. 9 - What is the usual shape of a marginal revenue cuwe...Ch. 9 - How can a monopolist identify the...Ch. 9 - How can a monopolist identify the...Ch. 9 - When a monopolist identifies its profit-maximizing...Ch. 9 - Is a monopolist allocatively efficient? Why or why...Ch. 9 - How does the quantity produced and price charged...Ch. 9 - ALCOA does not have the monopoly power it once...Ch. 9 - Why are generic pharmaceuticals significantly...Ch. 9 - For many years, the Justice Department has tried...Ch. 9 - Intellectual property laws are intended to promote...Ch. 9 - Imagine that you ale managing a small firm and...Ch. 9 - If a monopoly firm is earning profits, how much...Ch. 9 - Return to Figure 9.2. Suppose P0 is 10 and P1 is...Ch. 9 - Draw the demand curve, marginal revenue, and...Ch. 9 - Draw a monopolists demand curve, marginal revenue,...
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- How does a monopolist determine its profit-maximizing level of output? How does it determine the price that it charges?arrow_forwardHow can a monopolist identify the profitmaximizing level of output if it knows its marginal revenue and marginal costs?arrow_forwardA monopolist can sell the same product to different consumers at different prices.arrow_forward
- monopolist (with increasing marginal cost as production increase) is producing at a point at which marginal REVENUE exceeds marginal COST. How should it adjust its output to increase profit?arrow_forwardExplain how a profit-maximizing monopolist chooses its level of output and the price of its goods.arrow_forwardHi! I got stuck with my microeconomics homework. Can you please help? Here's the problem: A monopolist knows that in order to expand the quantity of output it produces from 8 to 9 units it must lower the price of its output from $2 to $1. Calculate the quantity effect and the price effect. Use these results to calculate the monopolist’s marginal revenue of producing the 9th unit. The marginal cost of producing the 9th unit is positive. Is it a good idea for the monopolist to produce the 9th unit? It is from Microeconomics: Canadian Edition by Paul Krugman; Robin Wells; Iris Au; Jack Parkinsonarrow_forward
- A product may be provided by a monopolist, but the market may be contestable. How can it be that a monopoly can be as efficient as a perfectly competitive market?arrow_forwardOnly one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P=15−QP=15−Q Marginal Revenue: MR=15−2QMR=15−2Q Total Cost: TC=3+Q+0.5Q2TC=3+Q+0.5Q2 Marginal Cost: MC=3+QMC=3+Q where QQ is quantity and PP is the price measured in Wiknamian dollars. The monopolist produces ( ? ) soccer balls and sells them at a price of ($) each. The monopolist's profit is ($) in this case. One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market. The domestic production of soccer balls will ( rise or fall ) ? to ( ? ) soccer balls, and domestic consumption will ( rise or fall ) to ( ? ) soccer balls. Therefore, Wiknam will (…arrow_forwardSince the monopolist is a “price maker” and sets the price of his output, he will always charge the highest price. True or False? Why?arrow_forward
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