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 4RQ
To determine
What happens when the government regulates an industry.
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Check out a sample textbook solutionStudents have asked these similar questions
1.
The table below represents the demand for Widgets, Inc., which has a
monopoly in the sale of widgets. Calculate total revenue and marginal
revenue for the levels of output given. Draw the demand curve and the
marginal revenue curve in a same graph.
Quantity
0
1
2
3
4
LO
5
Price
$25
21
17
13
9
LO
5
Suppose that demand is Qlp)-2000-4p. Consider the marginal revenue curve of a monopolist who operates in this market.
Assume that it is plotted on a two-axis graph in which the horizontal axis measures quantities and the vertical axis measures
marginal revenue. What is the horizontal intercept of the marginal revenue curve?
O 500
O 750
O 1000
O 2000
O 250
You manage one of three firms in a market. You expect that one of the other firms will produce 20
units of output and the other firm will produce 10 units of output. Your monopoly quantity is 40.
How much output should your firm produce given your expectations regarding the output levels of
the other two firms?
O 25
O 15
O 30
O 40
Knowledge Booster
Similar questions
- 1.Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) a Kansas wheat farm; (d) the commercial bank in which you or your family has an account; (e) the automobile industry. In each case, justify your classification. LO1arrow_forward(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company is a monopoly, how much producer surplus is there when the monopolist maximizes profit? Price, Costs, Marginal Revenue O $180 O $90 O $0 O $20 $100 90 80 70 60 50 40 30 20 10 0 MR 1 2 3 4 5 6 7 8 9 Quantity (Thousands of subscriptions)arrow_forward10. Is the demand for a life-saving drug like Daraprim (Front Page Economics "Drugmaker Hikes Price of AIDS Drug 5,000 Percent!") likely to be elastic or inelastic? How does that affect the pricing decision of a monopolist? LO10-1 IT quarrow_forward
- Ignore 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 $arrow_forwardThe following diagram depicts the operating conditions for a profit-maximising monopolist. Calculate the deadweight loss created by this monopoly selling at the profit maximising point. Price ($) MC 10 Demand MR 5 7.5 10 Quantity (a) $4.25 (b) $6.25 (c) $8.25 (d) None of the above. 20 15 LO 20 15arrow_forwardThe figure on the right shows the demand schedule for a product produced by a single-price monopolist. Price ($) 9 8 0000 7 6 5 4 3 C. 5th unit Quantity demanded What is the lowest level of output at which marginal revenue becomes negative? OA. 6th unit OB. 9th unit D. 7th unit OE. 8th unit 5 6 7 8 9 10 11 Price ($) 141 222 =26=LO 13- 12- 11- 10- 9- 8- 4- 2- 1- 45 6 7 8 9 10 11 12 13 14 15 16 Quantity Earrow_forward
- Question 14 of 30 What is a natural monopoly? A monopoly that faces a high fixed cost and low marginal costs so that the average total cost curve slopes downward. A market in which there is only one firm. A monopoly resulting from one firm's exclusive ownership of a natural resource required to produce a good. O A monopoly that results from government issuing patents. Which of the firms is most likely to be a natural monopoly? O A firm that owns nearly all of the diamond mines in the world. A restaurant that is unable to practice price discrimination and must charge all consumers the same price. O Municipal Power Light, the local supplier of electricity. A pharmaceutical company that has the exclusive right to sell a patented drug. 46Ā°F aarrow_forwardQuestion 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompaniesā total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.arrow_forwardPrice (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 Dā 20 16 Quantity (millions)arrow_forward
- Question 17 3ģ- MC ATC 26 27 26 25 24 AVC 20 MR 100 190 260 300 400 What is the optimal output and price for the prafit maximizing, nondiscriminating monopolist in the exhibit above? O 190 and $30 O 190 and $26 O 190 and $25 O 260 and $28 O 300 and $27 D Question 18 $/9 30- MC ATC 28 27 AVC 26 25 24 D. 2ģ MR 100 190 260 300 400 Total cost for this nondiscriminating monopolist at its profit-maximizing output level in the exhibit above is O $7280 O $4750 $5700 None of the choices are correct O $4940 D Question 19 Why is collusian to raise prices highly unlikely among firms in perfectly competitive industries? O All the firms in competitive industries love their consumers too much to ever collude against them O There is only one firm in perfectly competitive industries, so whom would they collude with? ā¢ There are too many firms in perfectly competitive industries. O The products are too differentiated for collusion in perfectly competitive industries 3 This is a trick question becauseā¦arrow_forwardof aboul $92,00 Exhibit 9-4: A Monopoly Total Quantity Total Fixed Variable Price Demanded Cost Cost $100 $20 $0 90 1 $20 20 80 $20 48 70 $20 78 60 4 $20 110 50 $20 150 Refer to Exhibit 9-4. At an output level of 3 units, the monopolist earns a total profits of about O $80.00 $92.00 O $112.00 O$110.00 2. 3. 5.arrow_forwardPrice and cost (dollars per unit) 50.00 40.00 S=MC 30.00 20.00- 10.00. MR D. 100 200 300 400 500 Quantity (units per hour) In the above figure, a monopoly should charge $ for its output when maximizing profit. O $10 $20 $30 $40 O $50arrow_forward
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