Homework - chapter 12

There are 1,000 competitive firms of the size represented by AC1, and AC2 represents the only firms if there were a monopoly. In the figure below, how much less does an unregulated monopoly produce compared to a perfectly competitive industry?
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There are 1,000 competitive firms of the size represented by AC1, and AC2 represents the only firms if there were a monopoly. In the figure below, how much less does an unregulated monopoly produce compared to a perfectly competitive industry?
20b fewer units; set MR2 equal to marginal cost (that is, the intersection of those two curves on the graph) and find the quantity/x-axis. For the monopoly, that is 30b and for the perfectly competitive industry it is 1,000 times 50m, or 50b, do the difference is 20b.
There are 100 competitive firms of the size represented by AC1, and AC2 represents the only firms if there were a monopoly. In the figure below, how much more will an unregulated monopoly charge compared to a perfectly competitive industry?
$15 more; set MR2 equal to marginal cost (that is, the intersection of those two curves on the graph) and find the highest price on the demand curve at that quantity. Here, quantity is 20b, and the price is $50. The competitive industry is driven down to the minimum of AC1, where MC1 intersects it at $35. Therefore, the monopoly charges $15 more.
There are 100 competitive firms of the size represented by AC1, and AC2 represents the only firms if there were a monopoly. In the figure below, how much will a single competitive firm produce?
0.3m; the competitive industry is driven down to the minimum of AC1 , where MC1 intersects it at $35. At that price, the corresponding quantity demanded is 30m. Since there are 100 firms, each will produce 30m/100=0.3m.
There are 100 competitive firms of the size represented by AC1, and AC2 represents the only firms if there were a monopoly. In the figure below, what quantity will the monopoly produce?
20m; set marginal revenue equal to marginal cost (that is the intersection of those two curves on the graph) and find the quantity at that point on the quantity/x-axis.
There are 100 competitive firms of the size represented by AC1, and AC2 represents the only firms if there were a monopoly. In the figure below, what price will the monopoly charge?
$50; set the marginal revenue equal to marginal cost (that is the intersection of those two curves on the graph) and find the highest price by going up to the demand curve at that quantity.
In the figure below, what quantity will a monopoly produce if regulators set a price ceiling of $7? (assume this is a short-run scenario where the firm cannot exit the industry).
At quantity 30, MR = MC = $15, AC = $25, price given by demand = $36;
At quantity 45, MC = $10, AC = $18, price given by demand = $18;
At quantity 55, MC = price given by demand = $7, AC = $15.
55; MC pricing. A price, set by a regulator of a natural monopoly, equal to MC at the corresponding quantity demanded, here $7 and 55 units.
In the figure below, what price will a monopoly charge if regulators set a price ceiling set at $7?
At quantity 30, MR = MC = $15, AC = $25, price given by demand = $36;
At quantity 45, MC = $10, AC = $18, price given by demand = $18;
At quantity 55, MC = price given by demand = $7, AC = $15.
$7; MC pricing. A price set by a regulator of a natural monopoly, equal to MC at the corresponding quantity demanded, here $7 and 55 units.
In the figure above, what is the total cost of the regulated monopoly that sets price equal to the AC?
$810; the regulated monopoly is setting its price equal to the AC at the intersection of the demand and the AC curve, which is $18 and that determines its quantity, which is 45. So the total cost is $18*45=$810.
In the figure below, what is the average cost at a quantity of 20?
At quantity 20, MC = 6, MR = AC = 13, price given by demand = 19;
At quantity 40, MR = MC = 8, AC = 10.5, price given by demand = 16;
At quantity 60, MR = 2, AC = 10.5, MC = price given by demand = 13;
At quantity 70, MC = 17, AC = price given by demand = 11.
$13; AC is found by looking for the quantity, 20, then going up to the average cost curve and reading the value on the price/y-axis, here $13.
In the figure below, what is the MR at a quantity of 20?
At quantity 20, MC = 6, MR = AC = 13, price given by demand = 19;
At quantity 40, MR = MC = 8, AC = 10.5, price given by demand = 16;
At quantity 60, MR = 2, AC = 10.5, MC = price given by demand = 13;
At quantity 70, MC = 17, AC = price given by demand = 11.
$13; MR is found by looking for the quantity, 20, then going up to the MR curve and then reading the value on the price/y-axis, here $13.
In the figure below, what is the MC at a quantity of 40? At quantity 20, MC = 6, MR = AC = 13, price given by demand = 19; At quantity 40, MR = MC = 8, AC = 10.5, price given by demand = 16; At quantity 60, MR = 2, AC = 10.5, MC = price given by demand = 13; At quantity 70, MC = 17, AC = price given by demand = 11.$8; MC is found by looking for the quantity, 40, then going up to the MC curve and reading the value on the price/y-axis, here $8.Suppose you work for the FTC and have been asked to assess whether the FTC should build a case to block a proposed merger. Which of the following would be evidence in favor of blocking the merger? Select all that apply. a. The merger will reduce costs for the combined company substantially b. The HHI index will increase a great deal c. The combined company plans to shut down about half of its locations many of which are currently profitable. d. There are many close substitutes to the company's products e. There are high barriers to entry in the industry f. Both companies have very high accounting profit compared to revenueb., c., e., f.Predatory pricing is:hard to distinguish from an industry in which firms are competing intensely and are discovering ways to lower average total cost.A merger that increases the four firm HHI should be _____________.analyzed further to see if it will reduce competition in such a way that hurts consumers.An industry trade group whose purpose is to increase the profitability of industry members ______________.should probably be investigated by FTC to make sure members aren't colluding to fix prices.When it comes to regulating a natural monopoly, each of the simple solutions has its problems. Match the problems with the solution.Allow the monopoly to charge the price it sees fit. = This will result in prices that are well above marginal cost and result in an inefficient quantity produced. Ask the monopoly to give consumers a good deal. = With no incentives to change behavior this approach is not likely to change the monopolist's behavior. Require the monopoly to charge a price equal to marginal cost. = This is likely to result in a price below average total cost and may cause the monopoly to shut down. Require the monopoly to charge a price equal to average total cost. = This severely reduces the incentive for the monopoly to produce at the lowest possible cost and encourages business expenditure on things that benefit the employees.Which of the following are good examples of natural monopolies? Select all that apply. a. Sewer treatment plant b. Residential data connection (coaxial cable or fiber optic) c. Elementary schools d. Higher education e. Electricity delivery f. Hospitalsa., b., e.Who is most likely to be involved in writing regulations for a particular industry and why?Firms participating in the industry since the effect of the regulation is concentrated on a few who have a powerful incentive to shape it.