Questions tagged [monopoly]

A market structure in which there is a single firm acting as supplier.

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Price discrimination question

For this question the answer is b which is the TR of group 2. If price is the same, my question is why isn't the demand function of group 1 considered? Why is the TR of group 1 omitted?
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1answer
34 views

Are monopolies always price makers?

I have the following True/False question: A single price-taking firm on the market is called a monopoly. As far as I know, a monopoly is a price maker not a price taker. That being said if it is a ...
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48 views

Numerical Question on a subsidized monopoly

Suppose a government agency has a monopoly in the provision of internet connections. The marginal cost of providing internet connections is $ \frac12$, whereas the inverse demand function is given by: ...
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44 views

Profit Maximisation for a Monopolist

Suppose a monopolist faces the following inverse demand function : $p = exp(-Q)$ The monopolist can produce any positive level of output with zero variable cost. Its fixed cost is $F$. Find the ...
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1answer
92 views

3rd Degree Price Discrimination

I came across a True/False question in my economics problem set: Is the following statement true or false? "A monopolist can practice third-degree price discrimination in the two markets it ...
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1answer
53 views

Should Company B enter the market in the following cases

Say Company A has a monopoly producing product E, at a constant marginal cost of $3$ USD. Say the ideal number of units produced is $1$ unit which produces a profit of $2$ USD (=$P_{A}$). Next, ...
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2answers
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Why are so many pharmaceutical drugs so expensive? [closed]

In the US, the drug sofisbuvir, brand name sovaldir, and used to treat liver disease hepatitis C, was launched with a price tag of $1000 a pill; and in the UK, the manufacturer Gilead recommended a ...
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1answer
104 views

Elasticity of Supply for a Monopolist

Is the supply of output for a monopolist less elastic than that of a perfectly competitive firm with the same production function? On one hand, it seems impossible to calculate the elasticity of ...
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153 views

Can the internet be characterized as a public utility?

The idea of what a public utility is, economically, rather than just legally is not a new point of discussion. Philosophers like John Stuart Mill argued for the public provision of water and gas, ...
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1answer
24 views

Effect of changing MC on monopolists' maximised profits

Let a monopolist have constant MC = c, with no fixed costs. If $p(c)$ and $q(c)$ are the profit maximising price and output as a function of MC and the market demand schedule is given by $q = D(p)$, ...
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1answer
52 views

Is this market monopoly or duopoly?

Could you help me to identify monopoly, because I got confused. There is a company with market share of 54 %. The second one has market share of 21 %. Can this market be characterized as monopoly or ...
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1answer
28 views

Imperfect Price Discrimination profit per group

During imperfect price discrimination is it possible to determine profit per group. For example: Aggregated Cost function: C(Q) = 18*Q + 5; where Q = q1 + q2 Aggregated Demand (AD) for group 1: q1(...
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103 views

How do I find optimal price or maximise profit in a monopolistic market?

How do I find the optimal price for a monopolist given the monopolist's cost function and market demand? I have $Profit(y) = p*y + C(y)$ where $p$ is price, $y$ is output, and $C(y)$ is total cost. ...
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1answer
94 views

Can marginal revenue be increasing?

As per my calculations, the derivative of the MR curve is given by: $MR'(q)=2p'(q)+qp''(q)$, where $p(q)$ is the inverse demand curve. Therefore,for a downward sloping demand curve, if the second ...
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1answer
41 views

How does elasticity impact market efficiency?

I am wondering how the price elasticity of demand (or supply) impacts market efficiency. A more specific question - can we say that in a monopolized market elasticity will be low, and that in a ...
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3answers
530 views

What does liberal economic theory say about monopolies?

Ludwig von Mises in his book "Liberalism: In the Classical Tradition" writes that in liberal economic the monopolies are rare and have a tendency to disappear. For an outlooker like me, however, his ...
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1answer
66 views

Monopoly equilibrium with a completely inelastic demand [closed]

What is the impact of an inelastic demand function on a monopoly production and pricing strategy ? Theory states, that a monopoly will strive to maximize its profits, by arriving to a point where the ...
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603 views

Will the market for driverless cars move toward a monopoly?

There is a short article in The Economist (link below) where the writer makes the claim that because there are firms the exhibit economies of scale - in driverless technology - they will eventually ...
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1answer
104 views

Why do anti-trust regulators in China need to approve NXP's takeover?

Qualcomm is currently awaiting Chinese regulatory approval for its acquisition of rival NXP. Both companies aren't based in China. I'd understand that vehicles like tariffs can be used by countries ...
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1answer
44 views

Have countries with a monopoly on a resource in an area ever established 1-company monopolies in that area to drive up price?

Say its the 18th century and South America wants tea. Britain, for example could have a monopoly on the tea trade in the area. However if multiple British companies sell in the area they will drive ...
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1answer
121 views

Monopolist engaging in international trade

A monopolist faces a demand curve given by $P=60-2Q$ and has total costs given by $TC=Q^2$. Now suppose that the country in which this monopolist is located decides to engage in international trade. ...
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1answer
84 views

Can't government experiment on price in the case of a monopoly?

In the lecture given by Jon Gruber at MIT, he talks about the governmental regulations on monopolies, and he states that (in short) for government to regulate a monopoly, it needs to know the ...
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1answer
121 views

Taxing a monopoly

can someone explain me why in some books the Demand and marginal revenue moves and but in other books is the marginal cost that moves. Is this like taxing the demand vs taxing the supply? so the ...
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39 views

How to find right MRP_L in this economic problem?

Economic problem from my textbook (here is my translation from Russian): There is a firm that is both monopoly and monopsony. It's monopoly on market of its product and it's monopsony on labor market ...
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1answer
42 views

$p(0)\geq c'(0)$ in monopoly

$p(0)\geq c'(0)$ is assumed so that the inverse demand curve originates above the marginal cost curve. But what is the intuition behind this assumption? The highest willing-to-pay consumer is more ...
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1answer
603 views

Price elasticity and optimal pricing in a monopoly with zero marginal cost

I am having trouble understanding how to calculate the optimal price P for a good and understand the optimal price elasticity of demand in the following condition: The firm is a monopoly seeking to ...
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1answer
1k views

Monopoly - Where is the Markup formula derived from?

Problem: My lecturer wrote the marginal revenue formula before writing the markup formula, indicating some sort of similarity between the two. How it was written on the board: Market Power ...
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50 views

Why are some natural monopolies protected by the law from competition?

It just doesn't make sense. Any try to challenge a natural monopoly is fruitless (at the best) or an economic suicide (at the worst). Why would you forbid companies from doing such stupid move? It's ...
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1answer
1k views

Why would a natural monopoly lose money when MC=P, but a competitive firm would get positive accounting profit?

I assume that the natural monopoly is required by law to have maximum price=MC. According to this video such regulation would require constant subsidies for monopoly, because otherwise it would go ...
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645 views

Can a monopoly INCREASE the market surplus compared with a competitive market?

Monopolies are often blamed for DWLs(Dead Weight Losses), while competitive markets believed to work without DWLs (assuming zero taxes/subsidies and zero externalities). But I think I found an ...
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1answer
2k views

Block pricing vs Perfect price discrimination

I have just learned about Perfect price discrimination and block pricing. And I was wondering, in the case of these two graphs Block pricing & Perfect price discrimination. Why, in case of the ...
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2answers
92 views

Free market defense against anti-competitive behavior?

One argument against a completely free market economy without "government" oversight is the tendency towards anti-competitive behavior. The argument is that government laws are needed to prevent anti-...
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1answer
297 views

What is the definition of social welfare in monopoly?

I'm studying problem that requires me to calculate social welfare in a monopoly setting. But I dont know what social welfare is, and I can't find it in my book or by googling. What am I asked to ...
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2answers
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Monopolies are just a mathematical misunderstanding

A little head-scratcher (and a good example why we should be careful with notation). Consider a profit maximizing monopoly, that solves over price $$\max \pi = PQ(P) - C(Q(P)) \tag{1}$$ Following ...
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1answer
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Hayek's defense of competition regulation

This article claims Hayek endorsed competition regulation: As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from ...
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1answer
191 views

Can monopolistic dead weight loss persist without government intervention? If so how?

Can monopolistic dead weight loss persist without government intervention? If so how? I am researching monopolies and find dead weight loss proposed as an evil of monopolies but i can not find any ...
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2answers
947 views

Price discriminating monopolist question

A price discriminating monopolist sells in two markets. Inverse demand in market 1 is given by: $$P_1(Q_1) = 80 - (1/2)Q_1$$ and inverse demand in market 2 is given by: $$P_2(Q_2) = 100 - Q_2$$ The ...
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1answer
95 views

How effective is progressive tax at regulating monopoly?

Regardless of the morality of progressive taxes, the economical benefit of progressive tax is at least debatable. But could a highly progressive tax replace at least some of the american/european anti-...
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278 views

Monopoly marginal cost [closed]

I have recently been stumped on a microeconomics question where it gives a monopoly firm, its operating ATC (average total cost), price (average revenue), and quantity traded. First thing it wants me ...
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2answers
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Microeconomy, monopoly, maximum profit - two different answers when solving exercise in two different ways

Suppose that monopoly produces product $X$. Let $MC = 20$, Quantity demanded function is given by equation $Q_d = 600 - 2P$ (where $Q_d$ - demand curve, $P$ - price). Calculate the amount of ...
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1answer
118 views

Exercise about Monopoly price charging

In a two-period lived economy, one consumer wishes to buy a TV set in period 1. The consumer lives for two periods, and is willing to pay a maximum price of $100 per period of TV usage. In period ...
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1answer
90 views

Simple equilibrium in monopoly question

Given an inverse demand function for hangars: $$P = 3 - \frac{Q}{16,000}$$ and constant marginal cost of $1$, what is the equilibrium price and quantity of hangars in a monopoly? In a perfectly ...
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1answer
190 views

How to determine the price a monopolist will set when the demand curve the firm faces isn't known?

I'm reviewing the following question from my microeconomics course notes. I don't understand how to do part (b). A firm faces a perfectly elastic demand curve because the product it sells has a ...
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1answer
43 views

Simplifying a monoplist's objective function under incomplete information

I am working through Rochet and Stohle (2003) chapter on multi-dimensional screening, and I am struggling filling in the blanks between equation (2.1) p. 154, and its simplified form on page 155. In ...
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2answers
3k views

Effect of a subsidy on a monopoly

I'm trying to understand how a subsidy on a monopoly would affect the deadweight loss. I know a subsidy shifts the marginal cost curve downwards, creating a new equilibrium price (price decreases) and ...
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2answers
776 views

Monopoly and Taxes (Nicholson Exercise)

Hello I'm working through Microeconomic Theory : Basic Principles and Extensions of Nicholson and Snyder 10e, for an exam and I fail to get how to answer this question (p.517) : A specific tax is a ...
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1answer
172 views

How much is someone willing to pay to own a monopoly?

I'm currently working on a problem from Intermediate Microeconomics Workouts by Varian and I've become stuck on a particular question to do with monopolies. We are given the demand curve for a ...
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2answers
13k views

Why is the Marginal Cost (MC) of a monopoly horizontal

I presume it's because they're price makers, but this doesn't really answer much. Furethermore, in a monopoly is it Marginal Cost or Long run marginal cost that's horizontal?
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1answer
178 views

Extraction and royalty time path for a non-renewable resource under a monopolist assumption

I am trying to understand the time path of extraction and royalty (price) for a non-renewable resource under a monopolist framework. The problem is that in the main books on environmental/resource ...
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290 views

Would you consider airport parking to be a monopoly or a monopolistic market?

If you look at it one way and group the different companies that offer parking, it could be a monopoly as that is the only place you can park. On the other hand, the different companies offer ...