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Economics

David Begg, Gianluigi Vernasca, Stanley Fische

Chapter 8

Perfect competition and pure monopoly - all with Video Answers

Educators

Chapter Questions

04:48

Problem 1

A competitive industry has free entry and exit. Why does free exit matter? How would the analysis change if it was costly to exit?

Manasvee Singh
Manasvee Singh
Numerade Educator
08:09

Problem 2

We rarely see a perfectly competitive market because all the assumptions underlying competitive markets rarely hold together in reality. Why do we need to study something that may not exist in the real world?

Mohan Jain
Mohan Jain
Numerade Educator
05:23

Problem 3

Compare perfect competition and monopoly on the basis of:
a. the number of buyers and sellers.
b. the market supply curve.
c. the nature of the good sold in the market.

Manasvee Singh
Manasvee Singh
Numerade Educator
07:48

Problem 4

True or False (a) In a monopoly market, the social welfare is always lower than in a competitive market. (b) Price discrimination is likely to be most effective when the good being sold is a standardized commodity. (c) A firm charges different prices to customers buying different quantities. This is an example of third-degree price discrimination.

Mohan Jain
Mohan Jain
Numerade Educator
05:49

Problem 5

Common fallacies Why are these statements wrong? (a) Since competitive firms break even in the long run, there is no incentive to be a competitive firm. (b) By breaking up monopolies, we always get more output at a lower price.

Mohan Jain
Mohan Jain
Numerade Educator
04:31

Problem 6

The following table reports the data on total costs of a competitive firm. We know that the market price is $P=44$. Find the marginal cost curve. In a graph, plot the marginal revenue and marginal cost curves and show the amount of output that the firm should produce.

Natalie Britton
Natalie Britton
Numerade Educator
03:51

Problem 7

Draw a diagram showing a competitive industry in short-run equilibrium. Suppose this is the wool industry. The development of artificial fibres reduces the demand for wool. (a) Show what happens in the short run if all sheep farmers have identical costs. (b) What happens in the long run if there are high-cost and low-cost sheep farmers in the industry?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
08:31

Problem 8

The table below shows the demand curve facing a monopolist who produces at a constant marginal cost of $£ 6$. Calculate the monopolist's marginal revenue curve. What is the equilibrium output? What is the equilibrium price?

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
01:40

Problem 9

The table below shows the demand curve facing a monopolist who produces at a constant marginal cost of $£ 6$. Now suppose that, in addition to the constant marginal cost of $£ 6$, the monopolist has a fixed cost of $£ 2$. How does this affect the monopolist's output, price and profits? Why?

Marcus Esteban
Marcus Esteban
Numerade Educator
01:41

Problem 10

A monopolist faces the following inverse market demand: $P=502 Q$. Suppose that the total cost faced by the monopolist is $T C=10 Q .$ Find the profitmaximizing quantity produced by the monopolist. What about the price charged by the monopolist? Find the deadweight loss in the market. Illustrate your answer in a diagram.

Niamat Khuda
Niamat Khuda
Numerade Educator
12:11

Problem 11

The following table reports the total cost for a natural monopoly: Find the average cost curve and the marginal cost curve and plot them on a graph. What is the relationship between the two curves?

Hrithvik Gadhiya
Hrithvik Gadhiya
Numerade Educator
01:30

Problem 12

Consider a perfectly competitive firm that has a total cost of producing output given by: $T C=10 Q+2 Q^{2}$. The market price is $P=54$. Find the profitmaximizing quantity produced by the firm.

Manasvee Singh
Manasvee Singh
Numerade Educator
01:27

Problem 13

Consider a perfectly competitive firm that has a total cost of producing output given by: $T C=10 Q+2 Q^{2}$. The market price is $P=54$. Find the profitmaximizing quantity produced by the firm.

Manasvee Singh
Manasvee Singh
Numerade Educator
01:17

Problem 14

A firm's market power can be measured by its ability to raise price above marginal cost. Relative to the level of marginal cost, this measure is $(P-M C) / P$. How do you expect this to be related to the elasticity of demand for the monopolist's output?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator