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Microeconomics for MBAs: The Economic Way of Thinking for Managers

Richard B. McKenzie, Dwight R. Lee

Chapter 12

Monopoly Power and Firm Pricing Decisions - all with Video Answers

Educators


Chapter Questions

00:43

Problem 1

Many magazines offer multiyear subscriptions at a lower rate than one-year subscriptions. Explain the logic of such a scheme. Why might it be considered evidence of monopoly power on the part of the magazines?

Jennifer Stoner
Jennifer Stoner
Numerade Educator
01:38

Problem 2

Explain why a monopolized industry will tend to produce less than a competitive industry.

Daniel Cisneros
Daniel Cisneros
Numerade Educator
01:39

Problem 3

"If a monopoly retains its market power over the long long-run, it must be protected by barriers to entry." Explain. List some restrictions on the mobility of resources that might help a firm retain monopoly power.

Marcus Esteban
Marcus Esteban
Numerade Educator
06:42

Problem 4

Why, from an economic point of view, should antitrust action not be taken against all monopolies?

Puneet Prajapati
Puneet Prajapati
Numerade Educator
01:40

Problem 5

Given the information in the table below, complete the monopolist's marginal cost and marginal revenue schedules. Graph the demand, marginal cost, and marginal revenue curves, and find the profit-maximizing point of production. Assuming this monopolistic firm faces fixed costs of $$\$ 10$$, and must charge the same price for all units sold, how much profit does it make?
$$
\begin{array}{ccccc}
\begin{array}{l}
\text { Quantity } \\
\text { Produced } \\
\text { and Sold }
\end{array} & \text { Price } & \begin{array}{l}
\text { Total } \\
\text { Variable } \\
\text { Cost }
\end{array} & \begin{array}{l}
\text { Marginal } \\
\text { Cost }
\end{array} & \begin{array}{l}
\text { Marginal } \\
\text { Revenue }
\end{array} \\
\hline & & & \\
2 & \$ 12 & \$ 5 & \\
3 & 11 & 9 & \\
4 & 10 & 14 & \\
5 & 9 & 20 & \\
6 & 8 & 28 & \\
\end{array}
$$

Marcus Esteban
Marcus Esteban
Numerade Educator
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Problem 6

On the graph developed for question 5, identify the output and profits of a monopolist capable of perfect price discrimination.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
11:03

Problem 7

Suppose a monopoly capable of imperfect price discrimination divides its market into two segments, as shown in graphs (a) and (b). In graph (c), draw the monopolist's combined marginal revenue curve. Then, using the monopolist's marginal cost curve, as shown in graph (c), determine the monopolist's profit-maximizing output level. Indicate the quantity and price of the product sold in each market segment.

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
02:05

Problem 8

If a buyers fear that a "network firm" will become a true monopolist in the future, what does that fear do to the firm's current pricing policies?

Daniel Cisneros
Daniel Cisneros
Numerade Educator
03:11

Problem 9

What is the impact of antitrust enforcement in a market for a network good?

Tommy Nguyen
Tommy Nguyen
Numerade Educator