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Chapter 24: Q. 24.5LO (page 535)

Explain the social cost of monopolies.

Short Answer

Expert verified

Theresults of having a monopolistic market ascritical a competitive market is restricted output andthe next price.

Step by step solution

01

Introduction

Monopoly creates a social cost, called a deadweight loss, because some consumers who would be willing topurchase the merchandise up to itsmonetary value (MC),aren't served.

02

Given Information

In a monopoly,there's no supply curve because monopolists are price setters and not
price takers.

03

Explanation

The MC curveisn't the firm’s supply curve.
In a competitive market, firmsshould passively take themarket value as given.the provision curve describes the quantitiesthey'll placed on the market at any given price. If the firmmay be a monopoly itdoesn't need that information becauseit's settingthe value.

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Most popular questions from this chapter

Describe the demand and marginal revenue conditions a monopolist faces.

Currently, a monopolist's profit-maximizing output is 200units per week. It sells its output at a price of \(60per unit and collects \)30 per unit in revenues from the sale of the last unit produced each week. The firm's total costs each week are $9,000. Given this information, what are the firm's maximized weekly economic profits and its marginal cost?

Identify situations that can give rise to monopoly

Consider the revenue and cost conditions for a monopolist that are depicted in the following figure.

a. If price exceeds AVC, what is this producer's profit-maximizing (or loss-minimizing) output?

b. What are the firms economic profits (or losses)?

Use the following graph to answer the questions that follow,

a. What is the monopolist's profit-maximizing output?

b. At the profit-maximizing output rate, what are average total cost and total revenue ?

c. At the profit-maximizing output rate, what are the monopolist's total cost and total revenue?

d. What is the maximum profit?

e. Suppose that the marginal coot and average total cost curves in the diagram also illustrate the horizontal summation of the firms in a perfectly competitive industry in the long run. What would the equilibrium price and output be if the market were perfectly competitive? Explain the economic cost to society of allowing a monopoly to exist.
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