4. Under what circumstances is it reasonable to grant any degree of monopoly power to a firm? Offer specific examples of such economic situations by discussing positive elements of the existence of monopolies. 5. Explain how the problem of ownership is a significant factor in explaining the difficulty in maintaining the St. John's River as a clean river. Could more specific property rights with respect to the river help resolve this problem? Explain how.

4. Under what circumstances is it reasonable to grant any degree of monopoly power to a firm? Offer specific examples of such economic situations by discussing positive elements of the existence of monopolies. 5. Explain how the problem of ownership is a significant factor in explaining the difficulty in maintaining the St. John's River as a clean river. Could more specific property rights with respect to the river help resolve this problem? Explain how.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter11: Monopoly And Antitrust Policy

Section: Chapter Questions

Problem 4SCQ: As a result of globalization and new information and communications technology, would you expect...

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1. The problem with regulating a natural monopoly at marginal cost pricing is that regulations are generally impossible to enforce. the cost of regulation outweighs any potential benefits. regulating a market causes more deadweight loss. the monopolist firm will lose money and want to shut down. 2. Suppose an oil refinery produces air pollution that negatively affects the surrounding residents. Which of the following is not a policy the government could take to correct this externality? -Subsidize the refinery’s product. -Require the refinery to pay for and install scrubbers so that no pollution is released. -Estimate the damages caused by the pollution and force the refinery to pay that amount. -Enact an excise tax on the refinery’s product.
1. In the market for steel pots for boiling water, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for steel pots is 200 per month when there is no tax. The government imposes a tax of Rs.5 per steel vessel. As a result, the government is able to raise Rs.800 per month in tax revenue. a. Please, specify new equilibrium quantity of steel pots (after tax) b. Draw a graph to show the new and old equilibrium quantity and the tax revenue (before and after-tax) C. Suppose you are told that the equilibrium price was Rs.100 when the tax was not imposed. With the tax now the buyer pays Rs.103 and the seller receives Rs.98. What is the loss in consumer and producer surplus? Show it on the graph. d. What is the loss in welfare? Explain. e You advise the government that instead of a tax on steel pots they should impose the tax on the steel industry to minimize the welfare loss.…
. Can we consider WAPDA a government-created/state monopoly? Was creatingWAPDA bad public policy? Explain.ii. Why is marginal revenue less than the price for monopolies? Can marginal revenueever be negative? Explain.iii. Show the deadweight loss from unregulated monopoly. Explain your answer as itrelates to WAPDA.iv. Describe in detail the Public Policy measures that the government can use to managegovernment-created/state monopolies like WAPDA.
2. Should government take over ownership and management of a natural monopoly? Support your answer witheconomic theory and actual examples.
1. Sources of monopoly power Monopolists, unlike competitive firms, have some market power. A monopolist can increase price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Scenario In the public water industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes makes it risky and, most likely, unprofitable for competitors to enter the market. The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the…
b. $60. c. $70. Figure 15-22 The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. Price 24- 22 20 18 16 O d. $14. 14 12 10 8 6 4 2- 0 0 MC MR 20 40 60 80 100 120 ATC AVC Refer to Figure 15-22. Based upon the information shown, what is the deadweight loss created by Bearclaws? a. $140. D 140 Quantity
5. Indicate whether each of the following statements is true or false, and explain your answer.A. If a monoplist is producing a level of output at which demand is inelastic, the firm is not maximizing profits and increasing output will decrease total revenu.B. When a monopolist maximizes profits, the price is greater than the marginal cost of producing the output. This means that consumers are willing to pay more for additional units of the product than these additional units of the produce. Thus, the monopolist should produce and sell addional units of output.C.A monopolistically competitive firm produces a level of output at which price equals $80, marginal revenue equals $40, average total cost equals $100, marginal cost equals $40 , and average fixed cost equals $10. To maximize profit, the firm should produce a smaller output and sell it at a higher price.D. In a monopolistically competitive market, a firm has market power because it produces a differentiated product. This means…
Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1. a. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.b. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.c. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.