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Microeconomics

David C. Colander

Chapter 14

Monopoly and Monopolistic Competition - all with Video Answers

Educators

Chapter Questions

01:59

Problem 1

What is the key difference between a monopolist and a perfect competitor? $(L O 14-1)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:28

Problem 2

Does a monopolist take market price as given? Why or why not? $(L O 14-1)$

Daniel Cisneros
Daniel Cisneros
Numerade Educator
02:04

Problem 3

Why is marginal revenue below average revenue for a monopolist? $(L O 14-2)$

Daniel Cisneros
Daniel Cisneros
Numerade Educator
02:02

Problem 4

State what's wrong with the following graphs:

Heather Finn
Heather Finn
Numerade Educator
01:46

Problem 5

Say you place a lump-sum tax (a tax that is treated as a fixed cost) on a monopolist. How will that affect its output and pricing decisions? (LO14-2)

Jesse Leija
Jesse Leija
Numerade Educator
03:01

Problem 6

A monopolist is selling fish. But if the fish don't sell, they rot. What will be the likely elasticity at the point on the demand curve at which the monopolist sets the price? (Difficult) $(L O 14-2)$

Niamat Khuda
Niamat Khuda
Numerade Educator
01:40

Problem 7

Demonstrate graphically the profit-maximizing positions for a perfect competitor and a monopolist. How do they differ? $(L O 14-2)$

Marcus Esteban
Marcus Esteban
Numerade Educator
01:58

Problem 8

True or false? Monopolists differ from perfect competitors because monopolists make a profit. Why? $(L O 14-2)$

Jennifer Stoner
Jennifer Stoner
Numerade Educator

Problem 9

A monopolist with a straight-line demand curve finds that it can sell 2 units at $\$ 12$ each or 12 units at $\$ 2$ each. Its fixed cost is $\$ 20$ and its marginal cost is constant at $\$ 3$ per unit. $(L O I 4-2)$
a. Draw the $M C, A T C, M R,$ and demand curves for this monopolist.
b. At what output level would the monopolist produce?
c. At what output level would a perfectly competitive firm produce?

Check back soon!
02:12

Problem 10

Demonstrate the welfare loss created by a monopoly.

Niamat Khuda
Niamat Khuda
Numerade Educator
02:12

Problem 11

Will the welfare loss from a monopolist with a perfectly elastic marginal cost curve be greater or less than the welfare loss from a monopolist with an upward-sloping marginal cost curve? $(L O I 4-3)$

Niamat Khuda
Niamat Khuda
Numerade Educator
02:28

Problem 12

What three things must a firm be able to do to pricediscriminate? $(L O 14-3)$

Mihir Nayar
Mihir Nayar
Numerade Educator
00:42

Problem 13

The Government Accounting Office reported that airlines block new carriers at major airports. $(L O 14-4)$
a. What effect does such blocking have on fares and the number of flights at those airports?
b. How much are airlines willing to spend to control the use of gates to block new carriers?

Heather Duong
Heather Duong
Numerade Educator
01:54

Problem 14

How is efficiency related to the number of firms in an industry characterized by strong economies of scale? $(L O 14-4)$

Xiaomin Bian
Xiaomin Bian
Numerade Educator
01:08

Problem 15

During the 2001 anthrax scare, the U.S. government threatened to disregard Bayer's patent of ciprofloxacin, the most effective drug to fight anthrax, and license the production of the drug to American drug companies to stockpile the drug in case of an anthrax epidemic. While the policy would lower costs to the U.S. government of stockpiling the drug, it also would have other costs. What are those costs? (Difficult) $(L O 14-4)$

Joanna Quigley
Joanna Quigley
Numerade Educator
11:03

Problem 16

Econocompany is under investigation by the U.S. Department of Justice for violating antitrust laws. The government decides that Econocompany has a natural monopoly and that, if it is to keep the government's business, it must sell at a price equal to marginal cost. Econocompany says that it can't do that and hires you to explain to the government why it can't. $\quad(L O 14-4)$
a. Explain why in reference to the following graph.
b. What price would it charge if it were unregulated?
c. What price would you advise that it should be allowed to charge?

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
02:51

Problem 17

What is the first-mover advantage and how does it affect platform monopolies? $(L O I 4-4)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:51

Problem 18

What are the benefits of platform monopolies? What are the costs? $(L O I 4-4)$

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:42

Problem 19

What are the ways in which a firm can differentiate its product from that of its competitors? What is the overriding objective of product differentiation?

Daniel Cisneros
Daniel Cisneros
Numerade Educator
07:19

Problem 20

What are the "monopolistic" and the "competitive" elements of monopolistic competition? $(L O 14-5)$

Puneet Prajapati
Puneet Prajapati
Numerade Educator
02:06

Problem 21

Suppose a monopolistic competitor in long-run equilibrium has a constant marginal cost of $\$ 6$ and faces the demand curve given in the following table: $(L O 14-5)$.
a. What output will the firm choose?
b. What will be the monopolistic competitor's average fixed cost at the output it chooses?

Andrew Davis
Andrew Davis
Numerade Educator
02:04

Problem 22

If a monopolistic competitor is able to restrict output, why doesn't it earn economic profits? (LO14-5)

Daniel Cisneros
Daniel Cisneros
Numerade Educator
03:24

Problem 23

You're the manager of a firm that has constant marginal cost of \$6. Fixed cost is zero. The market structure is monopolistically competitive. You're faced with the following demand curve: $(L O 14-5)$

Daniel Cisneros
Daniel Cisneros
Numerade Educator
00:43

Problem 24

Manufacturers often pay "slotting fees," payments to retailers to provide their product prime shelf space. These fees range from $\$ 25,000$ for one item in one store to $\$ 3$ million for a chain of stores. An example is placing Doritos within a football display before Super Bowl Sunday. $(L O 14-5)$
a. In what type of market structure would this behavior likely be prevalent?
b. What does this behavior accomplish for the firm? Relate your answer to the observation that a typical supermarket stocks about 30,000 products.
c. Demonstrate the likely long-term profit in this market structure.
d. Firms have complained to the FTC that this practice is unfair. What is their likely argument?
e. What is an argument on the other side of that presented in $d ?$

Jennifer Stoner
Jennifer Stoner
Numerade Educator
00:56

Problem 25

Both a perfect competitor and a monopolistic competitor choose output where $M C=M R,$ and neither makes a profit in the long run. How is it, then, that the monopolistic competitor produces less than a perfect competitor? $(L O I 4-5)$

Daniel Cisneros
Daniel Cisneros
Numerade Educator