Microeconomics Chapter 12 Assignment

"No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist."

A monopoly is more likely to persist if the cross price elasticity of demand is

Which of the following is not a major barrier to entry into an industry?

Which of the following is a true statement?

Assume that a pure monopolist and a purely competitive firm have the same unit costs. In this case, determine what is true with respect to (a) price, (b) output, and (c) profits.
1. PMonopoly > PCompetition
2. PMonopoly < PCompetition
3. PMonopoly = PCompetition
4. QMonopoly > QCompetition
5. QMonopoly < QCompetition
6. QMonopoly = QCompetition
7. ProfitMonopoly > ProfitCompetition
8. ProfitMonopoly < ProfitCompetition
9. ProfitMonopoly = ProfitCompetition

a. Which of the combinations above are accurate?
b. Assume that a pure monopolist and a purely competitive firm have the same unit costs. In the case of a pure monopolist, resources will be allocated
c. Even though both monopolists and competitive firms follow the MC = MR rule in maximizing profits, there are differences in the economic outcomes because
d. The costs of a purely competitive firm and a monopoly may be different because
e. If a monopoly can experience economies of scale, it can

Indicate whether each of the following statements is true or false:

a. Because they can control product price, monopolists are always assured of profitable production by simply charging the highest price consumers will pay.
b. The pure monopolist seeks the output that will yield the greatest per-unit profit.
c. An excess of price over marginal cost is the market's way of signaling the need for more production of a good.
d. The more profitable a firm, the greater its monopoly power.
e. The monopolist has a pricing policy; the competitive producer does not.
f. With respect to resource allocation, the interests of the seller and of society coincide in a purely competitive market but conflict in a monopolized market.

Assume a monopolistic publisher has agreed to pay an author 10 percent of the total revenue from the sales of a text. Which of the following statements is true?

U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. U.S. pharmaceutical companies, for profit reasons, oppose laws allowing reimportation of drugs to the United States because reimportation would

It has been proposed that natural monopolists should be allowed to determine their profit-maximizing outputs and prices and then government should tax their profits away and distribute them to consumers in proportion to their purchases from the monopoly. This proposal

The MR curve of a perfectly competitive firm is horizontal. The MR curve of a monopoly firm is:

Refer to the demand schedule below.

a. Use the demand schedule to calculate total revenue and marginal revenue at each quantity.
b. Plot the demand, total-revenue, and marginal-revenue curves.
c. Suppose the marginal cost of successive units of output was zero. What output would the profit-seeking firm produce? (Assume the firm can only produce whole units.)

How often do perfectly competitive firms engage in price discrimination?

Suppose that a monopolist can segregate his buyers into two different groups to which he can charge two different prices. In order to maximize profit, the monopolist should charge a higher price to the group that has:

The main problem with imposing the socially optimal price (P = MC) on a monopoly is that the socially optimal price:

Assume that the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include a normal profit.

a. What is ATC per unit for each level of output listed in the table?
b. Is this a decreasing-cost industry?
c. Suppose that the market price for a bottle of vitamins is $2.50 and that at that price the total market quantity demanded is 75,000,000 bottles. How many firms will there be in this industry?
d. Suppose that, instead, the market quantity demanded at a price of $2.50 is only 75,000. How many firms do you expect there to be in this industry?
e. Review your answers to parts b, c, and d. Does the level of demand determine this industry's market structure?

A new production technology for making vitamins is invented by a college professor who decides not to patent it. Thus, it is available for anybody to copy and put into use. The TC per bottle for production up to 100,000 bottles per day is given in the following table.

a. What is ATC for each level of output listed in the table?
b. Suppose that for each 25,000-bottle-per-day increase in production above 100,000 bottles per day, TC increases by $5,000 (so that, for instance, 125,000 bottles per day would generate total costs of $85,000 and 150,000 bottles per day would generate total costs of $90,000). Is this a decreasing-cost industry?
c. Suppose that the price of a bottle of vitamins is $1.33 and that at that price the total quantity demanded by consumers is 75,000,000 bottles. How many firms will there be in this industry?
d. Suppose that, instead, the market quantity demanded at a price of $1.33 is only 75,000. How many firms do you expect there to be in this industry?
e. Review your answers to parts b, c, and d. Does the level of demand determine this industry's market structure?

Suppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $10 million per year and a variable cost of $1 per bag no matter how many bags are produced.

a. If this firm kept on increasing its output level, would ATC per bag ever increase?
This is ______
b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge?
At that price, what would be the size of the firm's profit or loss?
Would the firm want to exit the industry?
c. You find out that if you set the price at $2 per bag, consumers will demand 10 million bags. How big will the firm's profit or loss be at that price?
d. If consumers instead demanded 20 million bags at a price of $2 per bag, how big would the firm's profit or loss be?
e. Suppose that demand is perfectly inelastic at 20 million bags, so that consumers demand 20 million bags no matter what the price is. What price should you charge if you want the firm to earn only a fair rate of return? Assume as always that TC includes a normal profit.

Suppose that a price-discriminating monopolist has segregated its market into two groups of buyers as shown in the table below.

a. Calculate the missing total-revenue and marginal-revenue amounts for Group 1.
b. Assume that MC is $13 in both markets and MC = ATC at all output levels. What price will the firm charge in each market?
c. Based solely on these two prices, which market has the higher price elasticity of demand?
d. What will be this monopolist's total economic profit?

Suppose that a monopoly has costs for the various levels of output shown below.
This is