Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 2P
To determine
Barrier to the entry of new firm and the ways in which they block the new firms from the market.
Concept Introduction:
Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way. Larger the entity, lower is the cost.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
(Monopoly) Suppose that a certain manufacturer has amonopoly on the sorority and fraternity ring business(a constant-cost industry) because it has persuaded the“Greeks” to give it exclusive rights to their insignia.a. Using demand and cost curves, draw a diagram depictingthe firm’s profit-maximizing price and output level.b. Why is marginal revenue less than the price for this firm?c. on your diagram, show the deadweight loss that occursbecause the output level is determined by a monopolyrather than by a competitive market.d. What would happen to price and output if the Greeksdecided to charge the manufacturer a royalty fee of$3 per ring?
(ONLY PART D)
You are the manager for a monopoly with costs, demand, and marginal revenue as in the graph at the top on Figure 1.
a. Does the fact that you operate in a monopoly always guarantee that you can achieve higher profits by increasing the price?
b. Draw the area representing the profits on the top graph on Figure
c. Suppose one of your suppliers just announced an increase in prices for a specific part that your product requires. What should the impact be to each of the curves on the top graph of Figure 1? Explain
d. Suppose economic conditions change in such a way that the demand curve for your company shifts
Draw a demand curve on the bottom graph on Figure 1 that leads to zero economic profits.
Draw a demand curve on the bottom graph on Figure 1 such that any further leftward demand shift will cause you to shut down.
2. (Barriers to Entry) Identify the other two barriers to entry and explain how they block new firms from this market.
Chapter 9 Solutions
Econ Micro (book Only)
Knowledge Booster
Similar questions
- Question: Widget is a commodity that is traded in a perfectly competitive global market that consists of many small price-taking firms. The firms fall in three categories with the following characteristics: Number of firms Capacity of firm's plant (units AVC (S per Fixed cost per unit at full per year) Capital charge per unit at full capacity ($/unit) unit) capacity ($/unit) Type 25 100 units 30 15 10 1 Туре 50 50 units 40 20 10 Type 100 40 units 45 25 10 3 Assume that each firm's AVC is constant up to the capacity of its plant. Further, assume that once built, a firm's plant has zero redeployment value. Finally, assume that a typical entrant has a cost structure identical to the Type 1 firms and that there are many potential entrants. • The demand for widgets is Q = 8000 - 20P, where P is $ per unit and Q is measured in units per year. (Remember: use only whole numbers, and do not use any other characters or spaces.) a. The short-run equilibrium price in the world widgets market is:…arrow_forward(Table: Barrels of Oil 2) Refer to the table. What is the marginal revenue of producing the fifth barrel of oil? Barrel of Oil Produced Total Revenue Total Cost Price 1 $50 $4 $50 10 234567896 100 10 50 150 21 50 200 38 50 250 61 50 300 90 50 350 126 50 400 176 50 450 266 50 500 390 50 61 50 200 250arrow_forward(Short-Run Profit Maximization) Answer the following questions on the basis of the monopolist's situation illustrated in the following graph. a. At what output rate and price does the monopolist operate? b. In equilibrium, approximately what is the firm's total cost and total revenue? c. What is the firm's economic profit or loss in equilibrium?arrow_forward
- q 0 1 2 3 4 5 6 TFC $5 5 5 5 5 5 5 TVC $0 3 Marginal revenue is 5 9 16 25 36 MC $3 2 4 7 9 11 P= MR $5 5 5 5 5 5 5 TR $0 5 10 15 20 25 30 TC $5 8 10 14 21 30 41 Profit $-5 - 3 0 1 - 1 -5 - 11 A profit-maximizing firm should produce a quantity of 3 units. (Enter your response as a whole number.) marginal cost for the first units of output. If the company decides to produce more than units, the marginal cost would exceed marginal revenue and profit wouldarrow_forwardQuestion 2 suppose Boeing is the only firm that produces aeroplanes in the world. The marginal cost of producing an aeroplace of Boeing is $50,000. The quantity demanded for Boeing's aeroplane is provided as bleow. Table1 -Demand schedule Price/ Quantity (thousands $) 40,000 /10 30,000 /30 20,000 / 60 10,000 / 100 1) calculate Boeing's total revenue and marginal revenue. How many aeroplances will Boeing Produce? Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this linearrow_forward(Monopolistic Competition Market) 3D. What is the overall impact of the monopolistic competition market structure on the competition?arrow_forward
- (Figure: Pineapples) Refer to the figure. What is their total profit or loss? $360,000 $840,000 –$400,000 –$200,000arrow_forwardExplain the table Output (Units) Total Revenue (£) Total cost (£) Profit (£) Marginal revenue (£) Marginal cost (£) Change in profit (£) 0 0 3 -3 - - - 1 6 5 1 6 2 4 2 12 8 4 6 3 3 3 18 12 6 6 4 2 4 24 17 7 6 5 1 5 30 23 7 6 6 0 6 36 30 6 6 7 -1 7 42 38 4 6 8 -2 8 48 47 1 6 9 -3arrow_forward1. A certain computer company produces three kinds of computers, labelled A, B and C. This computer company has three factories, labelled 1, 2 and 3. The profit for each computer, the in-process space needed to produce each computer, and the market demand per day is indicated below: A B C 350 550 300 Product: Profit ($): In-process space (ft2): 20 Market demand/ day: 900 1200 750 15 10 As long as the number of computers produced are not more than the market demand, they will be sold. The three factories have the following production space: 2 3 Factory: Production space (ft2): 13000 12000 5000 1 (a) Identify variables for the optimization problem (b) Write down the objective function (c) Write down the constraints for production space (d) Write down the constraints for market demand. (e) Write down any other constraints needed to complete the optimization problemarrow_forward
- (1.) Johnny Rockabilly has just finished recording his latest CD. His record company marketing department determines that the demand for the CD is as follows: Number of CDs Price $24 10,000 22 20,000 20 30,000 18 40,000 6 50,000 3 60,000 The company can produce the CD with no fixed cost and a variable cost of $12 per CD. a. Find total revenues and marginal revenues for each of the quantities. b. What quantity of CDs would maximize profit? What would the price be?arrow_forward6. (Figure: Market Demand Curve I) The graph shows the market demand curve. Price ($) 40- 36 32 28- 24 20 16 12 8 0 MR 1 2 3 4 567 b. Bertrand competition with identical goods c. Cournot duopoly with identical goods MC=AC D 8 9 10 Quantity What are the equilibrium price and market output under the following market structures? a. a two-firm cartelarrow_forward(Monopolistic Competition Market) The main characteristic of the monopolistic competition market structure is product differentiation. 3A. Explain what is meant by product differentiation and what does it look like? 3B. Explain why the company does this and how? Thank you for the help Bartleby!arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
