Chapter 12, Problem 1TY

1. Which of the following companies most closely resembles a monopoly? Walmart Microsoft Starbucks McDonald's Question Source: Chiang 4e - Economics Princip 39 36 近

Explain fully why perfectly competitive firms and monopolies maximize profits by choosing the quantity where MR = MC. Explain why the profit maximizing price of the monopoly can be higher or lower than the profit maximizing price for perfect competition.

Critically evaluate and explain each statement: Because they can control product price, monopolists are always assured of profitable production by simply charging the highest price consumers will pay.

Many firms that sell in small markets are effectively monopolies; they are the sole provider of a good in their geographic area. Most of these firms earn positive economic profits, yet they are allowed to operate as monopolies without regulation by government. Why?

Question 4: The Baxter brothers - Bob, Bill, Ben and Brad – have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the internet. They can act as a monopolist if they choose to do so. Each time the movie is downloaded, their Internet Service Provider charges them a fee of $4. The Baxter brothers are arguing about which price to charge the customer per download. Here is the demand schedule for their film: Quantity of Downloads Denanded Price of Download $10 4 6. 2 10 15 a) Calculate the total revenue and marginal revenue per download. Price Quantity TR MR $10 6. 3 10 15 b) Bill is proud of the film and wants as many people as possible to download it. What price would he choose? How many downloads would be sold? c) Bob wants as much total revenue as possible. What price would he choose? How many downloads would be sold? d) Ben wants to maximize profits. What price would he choose? How many downloads would be sold?…