4)Application problems(Topic 9 & 10) Perfect Competition versus Monopoly: A small country town is served by manycompeting (price-taking) fruit and vegetable shops, who all have the same marginal costs. Theythen get together and decide to operate as one large monopoly firm. Using the diagram below,answer the following questions:(a) * What was the equilibrium price and quantity in this market when the firms were competingeach other? What is the new price and quantity once they form a monopoly?(b)aga*** What was the dollar value of the consumer and producer surplus under (i) perfectcompetition, and (ii) under monopoly? What, if any, is the size of the deadweight loss impliedby this market transitioning into a monopoly?Price$23ISupply EMC$13$10.5$9$31.000DemandMarginal Revenue1.250Quantity

a.The equilibrium price and quantity in the competitive market will be determined by the…

Answered: 4) Application problems (Topic 9 & 10)…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.7P

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Intellectual property laws are intended to promote innovation, but some economists, such as Milton Friedman, have argued that such laws are not desirable. In the United States, there is no intellectual property protection for food recipes or for fashion designs. Considering the state of these two industries, and hearing in mind the discussion of the inefficiency of monopolies, can you think of any reasons why intellectual property laws might hinder innovation in some cases?
How is monopoly different from perfect competition?
Suppose that, due to a successful advertising campaign, a monopolistic competitor experiences an increase in demand for its product. How will that affect the price it charges and the quantity it supplies?
How is the demand curve perceived by a perfectly competitive firm different from the demand curve perceived by a monopolist?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
In what sense is a natural monopoly natural?
The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinational enterprise that supplies Hi-tech components. Use the graph to answer the questions that follow. "image" i. State the elasticity of the monopoly firm demand curve. ii. Considering the figure, examine the benefits of the characteristics of themonopoly demand curve to ABC Inc. Ltd. iii. Suppose the demand and cost curves result in ABC Inc. Ltd earning aneconomic profit. Do you think ABC Inc. Ltd firm will earn profit in the longrun? Explain your answer. Assume all factors constant. iv. Examine the effects of ABC Inc. Ltd on consumers.
COURSE: Microeconomics - Perfect Competition, Monopoly and OligopolySuppose a market with 2 firms whose total costs are given by CTi = 10qi, facing a market demand given by: Q = 100 - P.(a) Determine Perfect Competition outcome, its marginal cost (MC), its price and market quantity (q). Graph.(b) Determine outcome of a monopoly, remembering that marginal revenue (MR) will be equal to marginal cost (MC) in this case and that monopolist's profit is (P × Q) - TC. Graph. Then, what difference can be seen by comparing this result with perfect competition result obtained in (a) above?(c) Determine Cournot result with identical firms (equal access) and there is product homogeneity (equal price), remembering to maximize profits of firms, derive them and obtain Reaction Function. Graph(d) Determine Cournot result with product homogeneity (equal price) and different costs such that: CT1=q12 and CT2 = 12q2 What difference do you appreciate with respect to result obtained in (c) above Graph.
follow. Table 13.1 Price (S) Quantity 4.00 2000 3.50 2400 3.00 2800 2.50 3200 2.00 3600 1.50 4000 1.00 4400 Refer to Table 13.1. If a monopoly faces the demand schedule given in the table, what is its marginal revenue from the 2400th unit it sells? A) $3.75 B) $1 C) $3.50 OD) $400
5. Monopoly versus perfect competition Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D�) and supply (S=MC�=MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Perfect CompetitionPC Outcome045901351802252703153604054505.04.54.03.53.02.52.01.51.00.50PRICE (Dollars per hot dog)QUANTITY (Hot dogs)DS=MC Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand…

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