When compared to the results in competitive markets, monopoly markets can be expected to have restricted output and lower prices have restricted output and higher prices have higher prices and equivalent output have lower prices and equivalent output
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- This question is inspired on the recent evolution of electricity markets in Switzerland and the EU.Suppose a market consists of three producers:i. Firm 1 (photovoltaics) has a marginal cost of production od CHF 1 and can produce up to 100 MW/h;ii. Firm 2 (hydroelectric) has a marginal cost od production of CHF 5 and can produce up to 200 MW/H;iii. Firm 3 (gas) has a marginal cost od production of CHF 20 and can produce up to 200 MW/h.For simplicity, assume that there are no fixed costs of production.Consumers are willing to pay a constant amount of 25 CHF for each additional MW/h up to 500 MW/h. a) Draw a graph of supply and demand for this market.b) Calculate the price in the market and the profits of each company.When consumers are maximizing their utility, they have to consider choosing the optimal combination of goods to buy. All of these O Their indifference curves The prices of each good Their income whenLet be the monopoly price and p" be the competitive price. Initially, there are many souvenir shops, each of which charges Pm (because consumers do not know the shops' prices), and buyers search costs are c. If the government pays for half of consumers' search costs, can there be a single-price equilibrium at a price less than Pm? Show that the argument we used to reject a single-price equilibrium at any price except the monopoly price did not depend on the size of the search cost Consider a deviant firm, where all other firms charge a single price (any single price) p where p*sp*pm The price, p, below the monopoly price. P is not a single-price equilibrium because a deviant firm can proft, whereby consumers who stop at the deviant store do not search further, from raising s price above p as long as it raises its price by no more than (Property format your expression using the tools in the palette Hover over tools to see keyboard shortcuts. Eg. a fraction can be created with…
- The accompanying diagram shows demand and long-run cost conditions in an industry. Price РО a a P1 P2 MC II Q0 LRATC MR LL Q1Q2 Output D ?Let pm be the monopoly price and p* be the competitive price. Initially, there are many souvenir shops, each of which charges pm (because consumers do not know the shops' prices), and buyers' search costs are c. If the government pays for half of consumers' search costs, can there be a single-price equilibrium at a price less than Pm? Show that the argument we used to reject a single-price equilibrium at any price except the monopoly price did not depend on the size of the search cost. Consider a deviant firm, where all other firms charge a single price (any single price) p where p*sp< Pm: The price, p, below the monopoly price, pm; is not a single-price equilibrium because a deviant firm can profit, whereby consumers who stop at the deviant store do not search further, from raising its price above p as long as it raises its price by no more than . (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a fraction can be…How is a legal monopoly different from a natural monopoly? In a legal monopoly, barriers to entry are created by the government. O In a legal monopoly, the monopolist has purchased the necessary certificate from the local government that allows the formation of a monopoly. A legal monopoly applies to government-run institutions, whereas a natural monopoly applies to all other resources O In a legal monopoly, the Federal Trade Commission has paid a firm to be the only producer of a product in a given area. JAN 12 MENU MacBook Air tv N A
- Suppose that an inventor discovers a new chemical compound that can change the color of people’seyes with no negative side effects. Since she holdsa patent on this chemical, she has a monopoly overthe sale of the new eye-color treatment. However,she’s an inventor, not a businessperson. Explain toher how she should set the price for the eye-colortreatment in order to maximize her profits.Sofia, a political science student, thinks that the government should intervene to revive declining industries like video stores and print newspapers. The government, she reasons, can resolve the coordination problem of getting the agents in these markets to trade. Do you agree with her? Explain your answer. OA. No, these industries are declining not because of coordination problems but, rather, because of falling demand. OB. Yes, the coordination problems of these industries suggest that the invisible hand is failing, so government intervention would revive these industries. OC. Yes, government intervention is necessary to generate more buyers for these industries, thus coordinating buyers with existing sellers. OD. No, these declining industries are plagued by coordination problems, but government intervention is never the answer.use diagramsa. What is the effect on the equilibrium price and quantity traded in market of theintroduction of a new technology that reduces costs of production for all firms?b. What is the effect on the equilibrium price and quantity traded in a market of a changein tastes that reduces the demand for the product?c. What is the effect on the equilibrium price and quantity traded in a market of theimposition of a tax per unit sold on suppliers?d. What is the effect on the equilibrium price and quantity traded in a market of thepayment of a subsidy per unit sold paid to suppliers?
- Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1. a. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.b. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.c. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.in a short run monopolist will shut down when_______ and a natural monoploy is most likely to occur in the market when_______? from the attached tabel: for the monopolist find the TR When the 3rd output is produced? from the attached graph: what would be the profit maximizing output for the monopolist firm?Complete the first row of the following table. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Profit Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. O Allow its costs to increase O Work to decrease its costs Long-Run Decision Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local cable company most likely do?