![]() A publisher faces the following demand schedule for the next novel by one of its popular authors: In each case, explain why the monopolist chooses to follow this business strategy.ġ. Give two examples of price discrimination. Describe the two problems that arise when regulators tell a natural monopoly that it must set a price equal to marginal cost.Ĩ. What gives the government the power to regulate mergers between firms? From the standpoint of the welfare of society, give a good reason and a bad reason that two firms might want to merge.ħ. Show theĭeadweight loss from the monopoly. In your diagram from the previous question, show the level of output that maximizes total surplus. Show the profit-maximizing level of output. Draw the demand, marginal-revenue, and marginal-cost curves for a monopolist. ![]() Why is a monopolist’s marginal revenue less than the price of its good? Can marginal revenue ever be negative? Explain.Ĥ. What does the size of a market have to do with whether an industry is a natural monopoly?ģ. Is creating this monopoly necessarily bad public policy? Explain.Ģ. ![]() Give an example of a government-created monopoly. More generally, when price discrimination is imperfect, it can either raise or lower welfare compared to the outcome with a single monopoly price. In the extreme case of perfect price discrimination, the deadweight losses of monopoly are completelyĮliminated. 344 PART FIVE FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRYĬonsumers who otherwise would not buy it. ![]()
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