Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 21, Problem 1RQ
To determine
Whether the statement is true or false about the monopoly .
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[Q: 11-4660750j Consider a monopoly that faces an inverse demand curve with a constant elasticity, p(Q) = Q°, and that has a constant marginal cost, MC(Q) = m.
If the own-price elasticity is e = - 6.9, marginal costs are m=7, and the government imposes a specific tax on the monopolist, what will be the tax incidence on consumers?
O A. 65.42%
O B. 38.1%
OC. the same incidence as when the tax is imposed on a perfectly competitive firm.
O D. 50%
O E. 116.95%
Price (dollars per unit)
30
24
21
18
16
12
O
4
$12 to $18.
$18 to $24.
$12 to $18.
a
$12 to $24.
8
MR
b
12
LRAC (inflated)
LRAC
MC
In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make
the regulator believe its costs are LRAC (inflated), then the price the firm charges will increase from
D₁
20
16
Quantity (millions)
Figure: Monopoly Profits 2
P.
18
16
14
12
10
6.
MC = AC
MR
0 20 40 60 80 100 120 140 160 180 Q
What is the consumer surplus at the monopolist profit-maximizing output and price?
O $245
$630
O $315
$280
4.
2)
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Similar questions
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- An industry with only one producer has a demand curve of P = 90-Q, with price in dollars and quantity in thousands. The monopolist's marginal cost curve is MC = 30 + 2Q. What is the deadweight loss of monopoly in this industry? O $100,000 O $37,500 O $72,667 $50,000arrow_forwardA local magic shop has a monopoly on the production of magic wands. Each customer wants only one magic wand, and the table below shows each customer's willingness to pay. The marginal cost of producing a wand is $21 no matter how many are produced. Quantity demanded Price per wand ($) LO 01 2 3 4 5 6 78 30 27 24 21 18 15 12 96 If the shop can charge only a single price, it will charge $ wands. If the firm practices perfect price discrimination, it will sell a total of earn a profit of $| and sell wands andarrow_forwardIgnore AFC and AVC 2. Suppose a pure monopolist faces the following demand schedule and the same cost data as the competitive producer discussed in problem 4 at the end of Chapter 10. Calculate the missing TR and MR amounts, and determine the profit-maximizing price and profit-maximizing output for this monopolist. What is the monopolist's profit? Verify your answer graphically and by comparing total revenue and total cost. LO11.4 Average Total Average Variable Average Marginal Product Fixed Cost Cost Total Cost Cost 0 $45 1 $60.00 $45.00 $105.00 40 2 30.00 42.50 72.50 35 3 20.00 40.00 60.00 30 4 15.00 37.50 52.50 35 5 12.00 37.00 49.00 40 6 10.00 37.50 47.50 45 7 8.57 38.57 47.14 55 8 7.50 40.63 48.13 65 9 6.67 43.33 50.00 75 10 6.00 46.50 52.50 Price Quantity Demanded Total Revenue Marginal Revenue $115 83 63 55 48 42 29 2 % 522332 100 0 1 2 3 4 5 6 7 37 8 9 10 $arrow_forward
- Monsanto holds significant regional monopoly power-in some regions they are a true monopoly being the only seller of agriculture seeds. If the elasticities of demand, JEDI, for soybean seeds is 3.5, and 3 for corn, then the profit-maximizing price (relative to marginal cost) for soybeans is times marginal cost, and the price is times marginal cost for corn. Round to one decimal if needed. A Moving to another question will save this response. « >arrow_forwardA monopolist has variable costs of VC = q² and no fixed costs and faces a demand curve of P = 24 - q, where P is price and q the quantity sold. What is the monopolist's profit? 072 O 64 None of the other answers is correct. O 48 O 36arrow_forwardSuppose that two identical firms are Cournot competitors. Industry demand is given by: p= 200 – q. - 42 where q and q2 are the outputs of Firm 1 and Firm 2 respectively. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20. Find the output quantity for each frm. 10 O 20 40 O 60 D Question 16 For the information in the above question, Find the output price. 70 50 90 100arrow_forward
- Industry Alpha Beta Kappa Delta The table shows market shares of... 1 30 80 25 20 Market Share of Firms in Industry 3 5 20 5 Multiple Choice Alpha 2 30 10 Beta 5 25 20 225 20 4 20 3 25 20 0 1 0 10 The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. Those who focus on monopoly structure would most likely assert that there is a violation of antitrust law in which industry? 6 OL 0 1 0 10 B for H ✪arrow_forwardQuestion 2 [JP.14.3.19] Consider a duopoly where the market demand is described by the equation: P = 150- Q. The marginal cost for each firm is $60. lo.] If the firms compete simultaneously with output, what is each firm's profit-maximizing output, the market quantity, and the price each firm charges? (b.) What is the economic profit eamed by each firm (from question [a]} [c.) If Firm 1 is a leader in output, what is each firm's profit-maximizing output, the market quantity, and the price each firm charges? [d.] What is the economic profit earned by each firm (from question [c])?arrow_forward3. Consider a market in which a monopolist would charge at a price of $10 for a particular good. Assume now the market is currently dominated by a pair of Bertrand duopolists who produce identical goods and compete on price in a one-shot game. They both face a marginal cost of $5. They start with colluding and agreeing to charge the monopoly price of $10 in an effort to maximize their profits. In equilibrium, the market price of the good will be.... (a) Over $10 (b) $10 (c) Between $5 and $10 (d) $5 (e) Less than $5 (f) None of the above Answer: 3d. A price war will break out, lowering the price to $5.arrow_forward
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