Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 16, Problem 2.1CE
a.
To determine
To describe: The reason responsible for the violation of the antitrust laws in the USA.
b.
To determine
To describe: The reason responsible for the violation of the antitrust laws in the USA.
c.
To determine
To describe: The reason responsible for the violation of the antitrust laws in the USA.
d.
To determine
To describe: The reason responsible for the violation of the antitrust laws in the USA.
e.
To determine
To describe: The reason responsible for the violation of the antitrust laws in the USA.
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In antitrust law, "price-fixing" refers to
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a company paying its suppliers a fixed price for certain inputs.
a company fixing the price of its own product regardless of the degree of competition.
competitors colluding to set their prices collectively.
the government fixing the prices of products of antitrust violators.
QUESTION 2: WORD LIMIT – MAXIMUM 500 WORDS
Using the Monopoly model, show using diagrams how a monopolist may sustain abnormal profits for the indefinite future. Should the competition commission litigate against firms who have a dominant market position? In your answer, make sure you use a diagram, list the assumptions for the model, and give examples of real world markets that may be dominated by monopolists. The diagram used should be your own and not taken from another source. (
d) If a price ceiling of $17.50 is imposed by the government on the monopolist, estimate (based on the graph) the quantity that the monopolist will produce. In this case, does the price ceiling in a monopoly improve economic efficiency or not?
e) Supposed that instead of a regular monopoly, the graph above pertains to a natural monopoly, what change must be made to the graph to depict a natural monopoly?
Chapter 16 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Based on the best available econometric estimates, the market elasticity of demand for your firm's product is -2. The marginal cost of producing the product is constant at $150, while average total cost at current production levels is $225. Determine your optimal per unit price if: a. you are a monopolist b. you compete against one other firm in a Cournot oligopoly c. you compete against 19 other firms in a Cournot oligopolyarrow_forwardProblem 5: Policy Analysis. A refrigerator monopolist would charge a price of 60 and sell 40 refrigerators. Its average cost would be 20. An antitrust authority decided that if there are five refrigerator suppliers, then price would be equal to average cost. With five suppliers, the price is 30, average cost is also 30, and the number of refrigerators produced is 70. (a) Assume that demand curve is linear, that is, Q = a – bP. What is the demand curve? What is the consumer surplus in a monopolistic industry? What is the consumer surplus in the industry with five firms? (b) How much is the producer surplus is a monopolistic industry? How much is the pro- ducer surplus in the industry with five firms? (c) If the antitrust authority wants to maximize net surplus, which market structure will it choose? A monopoly or a five firm industry?arrow_forwardA7) Suppose that a monopolist has a marginal cost of 4. Suppose that the market demand is Q(P) = 12 -P. Assuming that the monopoly maximizes its profit, what is the resulting deadweight loss? a) 25 b) 0 c) 5 d) 14 e) none of the abovearrow_forward
- Assume that a firm can obtain a monopoly the market shown in Figure 1 by lobbying for favorable government regulation. How much would a firm be willing to spend to obtain such a monopoly? Question options: a) $16.50 b) $4.50 c) $12 d) $7.50arrow_forwardc) Discuss various ways in which government policymakers might respond to the problems of monopoly.arrow_forwardSuppose a manufacturer sells to a retailer of its product. Final market demand for the product is given by P = a - bQ. The marginal cost of upstream manufacture is c. The unit costs associated with retailing are zero.(A) Suppose that the two stages are integrated and operated by a monopolist. What would the integrated monoply price of the final product be? What is the profit of the integrated monopolist? (B) Now assume that the two stages are not integrated, and in addition, each stage is a separate monopoly. Solve for the input price (that is, the price the manufacturer sets), the final product price, and the profits of each of the two stages.arrow_forward
- (b) Consider a monopoly firm producing chemicals facing a demand curve given by P = 520 – 2Q. The firm's total costs can be expressed as TC = 100Q + Q<+ 20 and marginal revenue as MR = 520 -4Q, where Q denotes the level of output. Given the above information, what is the firm's profit maximizing price and output?arrow_forwardPrice, Cost P4 P3- P2 P₁- MR ATC MC D Q₁ Q₂ Q3 Q4 Quantity The graph above shows the cost and revenue curves for a natural monopoly that provides electrical power to the town of Fanaland. If unregulated, the monopolist operates to maximize its profit. (a) Identify the monopolist's profit-maximizing quantity and price. (b) Assume the town government of Fanaland regulates the monopolist's price to achieve the allocatively efficient quantity. What price would the government set in order to achieve the allocatively efficient quantity? Explain. (c) Will producing the allocatively efficient quantity be economically feasible for the monopolist? profit? (d) Suppose instead the town government wants to regulate the monopolist to earn zero economic profit. What price would the government set to have the monopolist earn zero economic that of the unregulated monopolist? Explain: (e) Based on your answer to part (d), will the deadweight loss increase, decrease, or stay the same asarrow_forward(1A) Say the government places regulation on a natural monopolist so that for its product it can only set its price so high, e.g. a price ceiling. What is this type of regulation called? Price-cap regulation Cost-plus regulation Breakeven regulation (1B) Which of the following describes the typical shape of the monopolist's total cost curve? (a) Total costs decrease and become flatter as output rises.(b) Total costs are typically constant and are shown by a straight horizontal line.(c) Total costs rise and grow steeper as output rises. (1C) Which of the following statements is true about price discrimination In the United States. (a)Price discrimination is permitted.(b)Price discrimination is illegal.(c)Price discrimination is supported. (1D) In the economy, allocative efficiency takes place (a)when goods and services production is at their lowest costs.(b)when the mix of goods and services is at its ideal or optimal.(c) when deadweight loss of goods and services in an economy…arrow_forward
- 2) Suppose that consumers of a good can be represented by the demand function Q (P) = 50 - P. The good is manufactured by an upstream monopolist with cost function C (q) = Q2 + 2Q + 10. A downstream monopolist resells the good to consumers (without further production activity) (a) Determine the industry outcome, profits and consumer surplus. (b) Consider a vertical merger. Compare the industry outcome, profits and consumer surplus to part (a). (c) Suppose the upstream monopolist franchises the product to the downstream firm. Which two - part tariff should the upstream monopolist choose? Determine the profits of the firms.arrow_forwardSuppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (f) Assume River Company’s formation leads to technological advances that yield cost reductions, such that MC1 = AC1. Compared to the original equilibrium (in (a)), what is the net effect of River Company’s formation on welfare? (Calculate the new total surplus (consumer surplus + producer surplus), and take the difference from your answer to (a).) (g) Assume River Company’s formation leads to wage concessions from River Company employees, such that MC1 = AC1. Compared to the original equilibrium, what is the net effect of River Company’s formation on welfare? (h) Assume River Company’s formation leads to changes in work rules that lead to higher worker productivity, such that MC1 = AC1. Compared to the original…arrow_forwardB) Discuss the deadweight losses that arise in the case of a monopoly. Discuss the theory of contestable markets and its implication for the need for regulation.arrow_forward
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