Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 9, Problem 9.3IP
To determine
The effect of an increase in the
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Managerial Economics: A Problem Solving Approach
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- True false or uncertain. Explain why 1. A monopolist with no costs maximizes marginal revenue 2. The government can eliminate deadweight loss by regulating a natural monopoly so that price equals marginal cost. 3. Airlines that offer leisure and business airfares are practicing perfect price discrimination. 4. A monopolist facing perfectly elastic demand receives no producer surplusarrow_forwardGive typing answer with explanation and conclusion The inefficiency (dead-weight loss) of a monopoly (as compared to perfect competition) indicates the amount by which Group of answer choices price exceeds marginal revenue at a particular output level. consumer welfare is increased by the monopolist. price exceeds marginal cost at a particular output level. marginal benefits exceed marginal cost for those units not produced by the monopolist but that would otherwise be produced in a competitive market. marginal costs exceed marginal benefits for those units not produced by the monopolist but that would otherwise be produced in a competitive market.arrow_forwardConsider a market with a monopoly firm. Sales revenue of this firm is $15,960,000 total cost is $8,680,000 and average cost is $3.10 Another firm wants to enter the market and provide the same product at a lower price. To intimidate the potential competitor, the monopoly firm intends to use predatory pricing.By how much can this firm reduce the price of its product without losses? Enter your answer in the box below and round to two decimal places if necessary.arrow_forward
- You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1’s elasticity of demand is −3, while group 2’s is −5. Your marginal cost of producing the product is $40.a. Determine your optimal markups and prices under third-degree price discrimination.Instructions: Enter your responses rounded to two decimal places.Markup for group 1: Price for group 1: $ Markup for group 2: Price for group 2: $ b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box. check all that apply We are able to prevent resale between the groups.unanswered At least one group has elasticity of demand greater than 1 in absolute value.unanswered…arrow_forwardDescribe the difference in economic profit between a competitive firm and a monopolist in both the short and long run. Which should take longer to reach the long-run equilibrium? In the short run, both monopolists and competitive firms _____(can or cannot) earn positive economic profits. In the long run, _____________________ can earn a positive economic profit. 2nd blank choices - neither monopolists nor competititve firms both monopolists and competitive firms monopolists, but not competitive firms competitive firms, but not monopolists True or False: The adjustment to long-run equilibrium occurs more quickly for competitive industries than for monopolists. _________________ (true or false)arrow_forwardQuestions: 1. What type of monopoly is Meralco? Explain your answer.2. What inefficiencies does the over recovery impose on the market?3. Aside from the government directive, what can be done to prevent Meralco from overcharging?arrow_forward
- You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1’s elasticity of demand is −6, while group 2’s is −5. Your marginal cost of producing the product is $50.a. Determine your optimal markups and prices under third-degree price discrimination.Instructions: Enter your responses rounded to two decimal places.Markup for group 1: Price for group 1: $ Markup for group 2: Price for group 2: $ b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.arrow_forwardYou are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1’s elasticity of demand is −4, while group 2’s is −2. Your marginal cost of producing the product is $30.a. Determine your optimal markups and prices under third-degree price discrimination.Instructions: Enter your responses rounded to two decimal places.Markup for group 1: Price for group 1: $ Markup for group 2: Price for group 2: $ b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box. check all that apply 2 At least one group has elasticity of demand less than one in absolute value.unanswered At least one group has elasticity of demand greater than…arrow_forwardQuestion content area Part 1 Suppose a monopoly's price elasticity of demand equals −5 and the marginal cost of production equals $120.00. What is the firm's profit-maximizing price? Part 2 The profit-maximizing LOADING... price is $enter your response here. (Enter a numeric response using a real number rounded to two decimal places.)arrow_forward
- STIHL, Inc., manufactures gasoline-powered chain saws for professional, commercial, farm, and consumer markets. To “better serve” their customers, STIHL offers its chain saws in four different quality lines and associated price ranges: occasional use, midrange, professional, and arborist.1- Under what circumstances could offering multiple qualities of a product be price discrimination? 2- What form of price discrimination might this represent—first-, second-, or third-degree price discrimination? 3- Explain why this practice could increase profit at STIHL.arrow_forwardWhich of the following is likely a monopoly? a.All other answers are correct b. The Beatles (in being able to legally produce Beatles cds) c.A grocery store in a small town that has only 2 stores. It is a snowy and cold day , and the stores are located in opposites sides of the town. Driving to the other side to buy at the other store is then dangerous and uncomfortable. d.Microsoft - in the operating system market Which one ??arrow_forwardA fidget spinner manufacturer is producing 10,000 spinners, selling them for $2.75 each. At this level of output, marginal revenue is $2.75. From this information, would you conclude that the fidget spinner manufacturer is a competitive firm or a monopolist? Why?arrow_forward
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