Explain why it is not possible for a monopoly firm to maximise its profits by charging a price in the price region where demand is inelastic, even though there are no direct substitutes for its product. Also explain how a monopoly will be able to charge a higher price than a firm producing the good under perfect, oligopolistic, or monopolistic competition

Intel is the world’s largest manufacture of semiconductor chips by revenue. During the 1990s, Intel became the dominant supplier of microprocessors for PCs and was known for aggressive and anti-competitive tactics in defense of its market position. Consider the market for Intel’s Pentium II processor, released in May 1997. Assume Pentium II enjoyed a monopoly in computer processors. Intel’s cost of production is characterized by function C = 10Q2, marginal cost MC = 20Q, while the market demand for the product is P = 400 − 10Q.     Calculate Intel’s profit-maximizing quantity for its Pentium II processor. How much would Intel price its Pentium IIs?

Provide an example of a cost function for which a natural monopoly exists. Why might we want to allow natural monopolies to exist (e.g. how might social welfare benefit from such a monopoly)?

The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per hundred cubic feet) 9 36 32 28 24 20 16 12 0 MR 2 3 5 6 7 a QUANTITY (Hundreds of cubic feet) ATC MO 10 + Monopoly Outcome

How does monopoly compare with pure competition in terms of price, output, and efficiency? Explain.

Lagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able price discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) curves that Lagatt Green faces for beer in Lightington. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Lagatt Green is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE (Dollars per bottle) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 D MC D 15 20 25 30 3.5 QUANTITY (Thousands of bottles of beer) 45 ATC MR Price (Dollars per bottle) 2.00 2.25 40 Monopoly Outcome…

What is the peculiar shape of a natural monopolist's average total cost (ATC) curve, and what is the cause of that unusual shape? Fully explain why this type of ATC curve is likely to result in a natural monopoly, and draw a contrast between the ATC curve of a natural monopolist and that of a typical firm in a competitive industry.

Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. PRICE (Dollars per hot dog) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 45 Monopoly MC MR 90 135 180 225 270 315 QUANTITY (Hot dogs) D 360 405 450 Monopoly Outcome Deadweight Loss ?

Lagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able price discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) curves that Lagatt Green faces for beer in Lightington. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Lagatt Green is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 3.00 ATC 2.50 2.00 * 1.50 MC MR 1.5 2.0 PRICE (Dollars per bottle) 4.00 3.50 1.00 0.50 0 0 0.5 1.0 2.5 3.0 QUANTITY (Thousands of bottles of beer) 3.00 3.5 (Cans) D Complete the following table to…

What are the four most important ways a firm becomes a monopoly? Will a monopoly that maximizes profit also be maximizing revenue? Will it be maximizing output? Explain.   Assume the graph below represents the market for a monopolist. What quantity will the monopolist produce, and what price will she charge? What will her total revenue, costs, and profit be at this level of production? What will the deadweight loss for society be at this level of production? (Assume the MC curve is a straight line between the relevant points for this calculation.)   3. U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?