Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Chapter 9, Problem 5SCQ
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Draw the graph for a monopoly earning a positive economic profit. Suppose the government institutes a per unit tax on the good produced by the monopoly (consider the impact it will have on the cost curves). On the graph, show how this will affect the monopoly’s profit maximizing level of output and the price charged by the monopoly.
Draw and Label Price Axis, Quantity Axis, Demand Curve, Marginal Revenue Curve, Marginal Cost Curve, Average Total Cost Curve, New Marginal Cost Curve, New ATC Curve, Qm, MR=MC, MR=MC1 Qm1, Pm, Pm1, ATC point, ATC1 point, Deadweight Loss, Total Revenue, Total Cost, Profit
Discuss the basic differences between a
competitive and a monopoly market. Which
market has higher elastic demand in the long run
and why?
Suppose demand for a monopoly’s product falls so that its profit-maximizing price is below average variable cost. How much output should the firm supply? Draw the graph.
Chapter 9 Solutions
Principles of Economics 2e
Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Suppose the local electrical utility, a legal...Ch. 9 - If Congress reduced the period of patent...Ch. 9 - Suppose demand for a monopolys product falls 50...Ch. 9 - Imagine a monopolist could charge a different...Ch. 9 - How is monopoly different from perfect...Ch. 9 - What is a barrier to entry? Give some examples.Ch. 9 - What is a natural monopoly?Ch. 9 - What is a legal monopoly?
Ch. 9 - What is predatory pricing?Ch. 9 - How is intellectual property different from other...Ch. 9 - What legal mechanisms protect intellectual...Ch. 9 - In what sense is a natural monopoly natural?Ch. 9 - How is the demand curve perceived by a perfectly...Ch. 9 - How does the demand curve perceived by a...Ch. 9 - Is a monopolist a price taker? Explain briefly.Ch. 9 - What is the usual shape of a total revenue curve...Ch. 9 - What is the usual shape of a marginal revenue cuwe...Ch. 9 - How can a monopolist identify the...Ch. 9 - How can a monopolist identify the...Ch. 9 - When a monopolist identifies its profit-maximizing...Ch. 9 - Is a monopolist allocatively efficient? Why or why...Ch. 9 - How does the quantity produced and price charged...Ch. 9 - ALCOA does not have the monopoly power it once...Ch. 9 - Why are generic pharmaceuticals significantly...Ch. 9 - For many years, the Justice Department has tried...Ch. 9 - Intellectual property laws are intended to promote...Ch. 9 - Imagine that you ale managing a small firm and...Ch. 9 - If a monopoly firm is earning profits, how much...Ch. 9 - Return to Figure 9.2. Suppose P0 is 10 and P1 is...Ch. 9 - Draw the demand curve, marginal revenue, and...Ch. 9 - Draw a monopolists demand curve, marginal revenue,...
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- The accompanying graph depicts a hypothetical monopoly. Follow instuctions 1−3 below to identify the monopoly's profits. Place point E at the monopoly's profit maximizing price and quantity. Move the average total cost (ATC) curve to a position that depicts the monopoly earning a positive profit. Place the area labeled Profit in the area of the graph that represents the monopoly's profit.arrow_forwardWhat is the value of producer surplus? What is the value of deadweight loss? Assume that the firm is a monopoly with perfect price discrimination. What is its profit?arrow_forwardExercise A.2 Explain why monopoly means less social welfare. Is there any kind of price discrimination that does not generate loss of social welfare? Graphically represent the two situations.arrow_forward
- 100 60 MC=ATC MR 20 Demand 40 80 The graph above depicts the market for pastries. What is the profit for the firm if the market for pastries is a monopoly? $450 $800 $1600 $400arrow_forwardDraw the graph. If the monopoly is a price-discriminating monopoly charging some customers P1= $950 and other customers P2=$400, then: 1. At the price P1= $950, the monopoly will sell a quantity Q1 = ______ 2. At the price P2= $400, the monopoly will sell a quantity Q2 = ______. (Obs: calculation required here!)3. Total quantity sold at both prices is Q3 = Q1 + Q2 = ___________. 4. The profit earned from selling the quantity Q1 at P1 is Profit1 = ____________________(identify the area on the graph and calculate it).5. The profit earned from selling the quantity Q2 at P2 is Profit2= ____________________(identify the area on the graph and calculate it).6. The total profit earned by the price discriminating monopolist is Profit = Profit1 + Profit2 = _______.arrow_forwardMonopoly firms are a lot more profitable than perfectly competitive firms. The primary reason is that the monopoly firm charges a price that is greater than marginal cost at the profit maximizing quantity. Explain this statement with a graph. Specifically, explain how the profit maximizing quantity and price are determined.arrow_forward
- Draw the graph. If the monopoly is a doing perfect price discrimination, then: the monopoly produces a quantity Q = ______ where ________________ (which curves intersect?) the monopoly charges a price of ________ (trick question!!!!) the consumer surplus is CS = ______. the producer surplus is PS = _________(identify the area on the graph and calculate it). this monopoly ________ (is / is not) efficient because ______________________.arrow_forward13. You just got a patent for the first commercial self-driving car. The following table shows the elasticity of the demand and the marginal cost of production of your cars in several production centers across the globe. Assuming that this are constant, can you approximate what would be the optimal price for your cars? City Marginal Cost Elasticity Price Wolfburg, Germany Barcelona, Spain Tokyo, Japan Ulsan, South Korea East London, South Africa Mexico City, Mexico $20, 000 $18, 000 $22, 000 $16, 000 $10, 000 $12, 000 -1.5 $60, 000.00 $24, 000.00 $33, 000.00 $32, 000.00 $11, 428.60 $14, 400.00 -4.0 -3.0 -2.0 -8.0 -6.0arrow_forwardWhat economic formula or graph does the Anti-Trust Department follow before they decide to break up a monopoly? Multiple Choice They look to see if MC=MR is beyond $10 billion. They try to calculate if price elasticity is less than .25 and inelastic. They do not use any commonly known formulas or graphs. Often times it is based on normative economics and/or it could be politically motivated. The number of registered consumer complaints must be beyond 10,000.arrow_forward
- When does a company officially become a monopoly? a. when it controls more than 25 percent of the output of a certain product b. when the government decides the company is a threat to the national economy c. when a company controls the output for a marketable product without meaningful competition d. when a company controls more than 50 percent of the output of a productarrow_forward2. Suppose the cost function for a monopoly is given by TC =F+c.q where TC is the total cost, F is the fixed cost and q is the output of the firm. The demand function for the monopoly is given by q = A-bP where A > 0 and b > 0. Find out the profit maximizing price, quantity, and profit for the monopoly. Also find out the expression for the marginal revenue of the monopoly as well as the elasticity of demand facing the monopoly.arrow_forwardPrice and cost (dollars per subscription) 64.00 58.00 48.40 40.00 MR MC ATC D 32 80 Quantity of cable subscriptions (per month in thousands) Qarrow_forward
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