Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 3.A, Problem 6ARQ
To determine
Demand and supply.
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The figure below illustrates the market for steel. If the steel market is competitive, firms can produce steel at a constant marginal cost of $100 per ton. Therefore, the price of steel is $100 per ton, and 100 tons are produced. Assume that if all the steel companies consolidate into a monopoly, the monopoly marginal cost will fall to $70 per ton. Use the straight line tool to draw the monopoly marginal revenue and marginal cost lines (extend the marginal cost line to 300 tons). Then use the plot point tool to plot the monopoly profit maximizing price and output on the demand curve.
Part 2.
If the market is competitive, total surplus is $ _________
Part 3.
If the market is controlled by a monopoly, total surplus is $________
In India, Cisco’s market share of the Ethernet switch and router market is approximately 67 percent. Juniper and HP each have market shares of about 6.5 percent, and several other firms have somewhat smaller market shares. Draw a diagram showing the equilibrium in this dominant firm market. Identify the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms. Illustrate what happens to the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms if additional fringe firms enter the market
Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing
substitutes for this good, the price of EpiPens is $150.
Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the
economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be.
The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows
the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power.
On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will
automatically extend to both axes.
1000
900
9, at $150
800
700
600
Profit Max
500
400
ATC at Profit Max
300
200
ATC
Profit
100
MC-
MR…
Chapter 3 Solutions
Macroeconomics: Principles, Problems, & Policies
Ch. 3.A - Prob. 1ADQCh. 3.A - Prob. 2ADQCh. 3.A - Prob. 3ADQCh. 3.A - Prob. 4ADQCh. 3.A - Prob. 5ADQCh. 3.A - Prob. 6ADQCh. 3.A - Prob. 7ADQCh. 3.A - Prob. 1ARQCh. 3.A - Prob. 2ARQCh. 3.A - Prob. 3ARQ
Ch. 3.A - Prob. 4ARQCh. 3.A - Prob. 5ARQCh. 3.A - Prob. 6ARQCh. 3.A - Prob. 1APCh. 3.A - Prob. 2APCh. 3.A - Prob. 3APCh. 3.6 - Prob. 1QQCh. 3.6 - Prob. 2QQCh. 3.6 - Prob. 3QQCh. 3.6 - Prob. 4QQCh. 3 - Prob. 1DQCh. 3 - Prob. 2DQCh. 3 - Prob. 3DQCh. 3 - Prob. 4DQCh. 3 - Prob. 5DQCh. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7P
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