Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 12, Problem 2P
(a)
To determine
Whether the given statement reflects the decision for
(b)
To determine
Whether the given statement reflects the decision for monopoly in the market or not.
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The Canadian Radio-Television Commission (CRTC) makes decisions about who can be licensed to operate radio or television stations, and who can sell various telecommunication services. Recently the CRTC agreed that one firm should have the exclusive right (i.e., a monopoly) to sell Direct-to-Home satellite TV services. The Canadian government reacted to this decision by ordering the CRTC to allow other firms to apply for the right to sell the same service. Does the Canadian government have the right to intervene in this matter? Why or why not? Why do you think the Canadian government would want to intervene in this matter?
We have learned the definition of monopoly as a market with one seller. Let's take some time to understand what that means, and how it can come about. What are some of the reasons that a market could be a monopoly? What is giving the monopolist their exclusive position in the market? Everyone should discuss a few reasons and/or examples of how a monopoly can come into existence.
Typically the model of Monopoly predicts that all customers are charged the same price and that the monopolist selects the quantity and price combination from the market demand curve that maximizes profit. However, there are times where a monopolist may at least attempt to charge different prices for the exact same product depending on each consumer's willingness and ability to pay. In this case the monopolist might offer the product at a lower price to those who would otherwise not buy it, thus increasing quantity consumed in the market and reducing some of what is called the dead weight loss of monopoly.…
natural monopoly is
of adding an additional customer is very low. An example of a
With natural monopolies, because of
one producer can serve the entire market more efficiently than a number of
smaller producers.
An example of a monopoly that arises due to control of physical resources is
A
gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time.
In the United States, exclusive patent rights last for
A
trademark is an identifying symbol or name for a particular good, like Chiquita bananas.
A
"is a form of protection provided by the laws of the United States for 'original works of authorship’ including
literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual creations."
intellectual property.
Taken together, we call the combination of patents, trademarks, copyrights, and
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Chapter 12 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- A patent effectively allows a firm to operate as a monopoly while the patent is in effect. Some people argue that the market power created by patents harms consumers and shouldn't be granted. Others argue that patents are needed to encourage research and innovation. You can read the article from Forbes to learn more about the history and policy surrounding patents. Classify the arguments below as either arguments for patents or arguments against patents. Arguments For Patents Arguments Against Patents Answer Bank prevents free-riding encourages higher prices for consumers prevents competition in the market research results in a positive externality for society leads to an ineffient level of productionarrow_forwardExhibit 12.4 The Market Demand Curve for Claritin Price $8 With patent protection from the government, the demand curve that Schering-Plough faces for its sales of Claritin is the entire market. For example, if Schering-Plough chose a price of $4, then it would be able to sell 400 million units, but the demand curve shows that if it chose a price of $6 or higher, it wouldn't sell any Claritin, despite having a monopoly. 7 4 3 2 DClaritin 1 Let's assume/lestimate: What would the market 100 200 300 400 500 600 700 800 price and the quantity be under perfect competition? Demand: p=7-x/150 Quantity (in millions of pills) Cost = 1*x %3D And what for the Marginal Cost c'=1 monopoly?arrow_forwardA patent gave Sony a legal monopoly to produce a robot dog called Aibo. The Chihuahua-size pooch robot can sit, chase balls, dance, and play an electronic tune. When Sony started selling the toy in July 1999, it announced that it would sell 3,000 Aibo robots in Japan for about $2,000 each and a limited litter of in the United States for $2,500 each. Suppose that Sony's marginal cost of producing Aibos is $500.Its inverse demand curve is Pj= 3500−0.5Qj in Japan and Pa =4500−Qa Solve for the equilibrium prices and quantities (assuming that U.S. customers cannot buy robots from Japan). The equilibrium quantity in Japan is ____and the price, Pj is $____arrow_forward
- map/ihdex.html?_con=con&external_browser%3D0&launchUrl=https%253A%252F%252Fnewconnect.m.. Because of their unique expertise with explosives, the Zambino brothers have long enjoyed a monopoly of the European market for public fireworks displays for crowds above a quarter of a million. The annual demand for these fireworks displays is P= 160 - 1Q. The marginal cost of putting on a fireworks display is 55. A family dispute broke the firm in two. Alfredo Zambino now runs one firm and Luigi Zambino runs the other. They still have the same marginal costs, but now they are Cournot duopolists. How much profit has the family lost? (Round your answer to 2 decimal places (e.g., 32.16). Negative answer should be indicated by a minus sign.) 00:24 P Type here to search 14/02/2022 acerarrow_forwardSuppose you have been tasked with regulating a single monopoly firm that sells 50-kilogram bags of concrete. The firm has fixed costs of $30 million per year and a variable cost of $2 per bag no matter how many bags are produced. Instructions: Enter your answers as whole numbers. In part e, round your answer to 2 decimal places. If this firm kept on increasing its output level, would ATC per bag ever increase? (Click to select) Is this a decreasing-cost industry? (Click to select) If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge? $C O per bag. At that price, what would be the size of the firm's profit or loss? At that price, the firm's (Click to select)| |equals $C )million. Would the firm want to exit the industry? (Cick to select) You find out that if you set the price at $3 per bag, consumers will demand 30 million bags. How big will the firm's profit or loss be at that price? $0 If consumers instead demanded 40 million bags…arrow_forwardMustapha maintains a monopoly in the holographic TV market because of its patent, but it is about to expire. The market demand and Mustapha's production cost are given by: P = 100 -0.50 and TC = 100+ 0.5Q² The market price is decimal place). The market quantity is or decimal place). The monopoly profit is sign, comma or decimal place). (please put your answer in numerical values without any dollar sign, comma or (please put your answer in numerical values without any comma (please put your answer in numerical values without any dollararrow_forward
- The newly founded country of Cardamom, which has similar laws to the United States, has a wealthy government with plenty of resources to help them run the country; they also have extensive electricity generation knowledge and resources. Spark is a natural unregulated monopoly in the country of Cardamom, which currently controls the country's electricity supply and makes an annual profit of $250,000. Recently, Spark's outrageous electricity prices have led to riots and general public discontent. In response, the government is considering various public policies to decrease the inefficiency. Classify the suggestions based on whether the government recommendations are potentially plausible or not. Plausible actions by the government Implausible actions by the government Answer Bank The government regulates output at the point where marginal revenue = marginal cost. The government recommends Spark buying out and merging with the country's public education system. The government tells Spark…arrow_forwardThe figure to the right shows the average total cost curve for a firm producing electricity and the total demand for electricity in the firm's market. If the firm is a monopoly and produces 36 billion kilowatt hours of electricity per year, then its average total cost of production will be $ 0.16 per kilowatt hour. (Enter a numeric response using a real number rounded to two decimal places.) Now suppose instead that two firms are in the market, each producing half of the market's electricity. If each firm has the same average total cost curve, then the average cost of producing electricity will now be $0.08 per kilowatt hour. Price and cost (dollars per kilowatt hour) 0.52- 0.48- 0.44- 0.4- 0.36 0.32- 0.28- 0.24- 0.2- 0.16 0.12- 0.08- 0.04- 0- 0 4 30 8 12 16 20 24 28 32 36 40 4 Quantity of kilowatt hours (in billions)arrow_forwardSuppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $30 million per year and a variable cost of $6 per bag no matter how many bags are produced. Instructions: Enter your answers as a whole number. In part e, round your answer to two decimal places. a. If this firm keeps increasing its output level, will ATC per bag ever increase? (Click to select) ♥ Is this a decreasing-cost industry? (Click to select) ♥ b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge? $ per bag At that price, the size of the firm's (Click to select) would be $ million. Will the firm want to exit the industry? (Click to select) V c. You find out that if you set the price at $7 per bag, consumers will demand 30 million bags. At that price, the firm's profit or loss will be $ million. d. If consumers instead demanded 40 million bags at a price of $7, how big would the firm's…arrow_forward
- We have learned the definition of monopoly as a market with one seller. Let's take some time to understand what that means, and how it can come about. What are some of the reasons that a market could be a monopoly? What is giving the monopolist their exclusive position in the market? Everyone should discuss a few reasons and/or examples of how a monopoly can come into existence.arrow_forwardMany European governments are reluctant to allow online betting in an attempt to protect their national gambling businesses. A recent study found that seven countries out of the 27 in the European Union banned online gambling. Of the other 20 only 13 have opened their markets to competition; in the rest gambling is dominated by monopolies owned or licensed by the government. In the Netherlands, for example, residents can only place online bets with a state monopoly: De Lotto. The Ministry of Justice even warned banks in the country that they could be prosecuted if they transferred money to online gambling companies. Other countries have ordered online betting companies to block access to their sites. Their governments argue that this is to protect people from gambling excessively. However the revenue they gain from their own monopolies should not be ignored as a possible motive. Questions If governments believe that gambling is bad for their citizens then in economic terms how would…arrow_forwardWhat 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?arrow_forward
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