Questions tagged [monopoly]

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

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1 answer
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A monopolist has decreasing average costs, setting the price equal to AC will lead to?

1)what will happen to the Output compared to the situation where MR=MC ? 2)what will happen to the Output compare to Competitive Output? Attempt at Soln. : 1) 2) so definitely quantity of o/t for ...
2 votes
2 answers
1k views

Pareto Improvement with Monopolies

This may be one of the more 'elementary' questions on this site.. But I really can't wrap my head around it and a search on the web hasn't yielded much. Given that Pareto efficiency is defined as when ...
1 vote
2 answers
241 views

How does a CLEC innovate?

A CLEC, competitive local exchange carrier, is described... A competitive local exchange carrier (CLEC), in the United States and Canada, is a telecommunications provider company (sometimes called a &...
2 votes
1 answer
53 views

How price is determined in the following monopoly model question?

I am studying microeconomics, and got stuck on the following question, specifically, part (b) and part (c): A monopoly-owned retail store is located next to a monopoly-owned parking lot. (The store ...
2 votes
1 answer
198 views

Book reference for graphs explaining ad valorem and specific taxes

Does anyone know any book in which I can read and see graphs about the ad valorem or specific tax in monopolies or perfect competition? I need a graph like this with the explanation but i can't find ...
2 votes
1 answer
126 views

Do monopolistic firms indirectly increase prices of products sold by perfectly competitive firms?

Correct me if I'm wrong, but this is my understanding: In perfect competition, firms set the price at the marginal cost of production. This gives them a relatively low amount of profit. In ...
3 votes
2 answers
383 views

Does profit maximization imply cost minimization in both pure competition and monopoly?

How do I show that profit maximization implies cost minimization (in pure competition)? Suppose we only consider inputs $l,k$ whose prices are $w,r$ and output price $p$. Profit is $\pi = pf(k,l) - wl ...
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High Fixed Cost and Zero VC

Suppose a Monopoly has a High Fixed Cost= 0.5 and VC=0 . The Profit Max O/t : Q=1 But the Profit = -0.13 (which is < 0) which means -0.13 > -0.5 Should the Firm Produce produce Q=1 or Q=0 ? ...
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1 answer
127 views

perfect price discrimination and allocative efficiency for a monopoly

Maybe I am just confusing myself, but what does charging a different price at every unit have to do with an output level being allocatively efficient? I understand what price discrimination is, I just ...
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2 answers
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Doubt on Calculation of MR

So this is very beginner level doubt. I know $ MR = \frac{\partial TR}{\partial q} $ . So TR need to be in terms of q to differentiate. This helps us to find Optimal Output level in Monopoly by ...
2 votes
2 answers
306 views

Does a perfectly price discriminating natural monopoly cause externalities or any type of market failure?

In perfect price discrimination, all mutually beneficial trades take place, the natural monopoly captures 100% of the surplus, and pareto efficiency is achieved. However, I've read various sources ...
5 votes
2 answers
11k views

How can the abuses of monopoly power lead to market failure?

I know that the abuses of monopoly power can cause market failure, but I don't know why that is. I am guessing that because monopolies face a lack of competition, they have no incentive to improve ...
1 vote
2 answers
106 views

Question About Non-Discriminating Monopolist - Mathematics for Economists by Simon and Blume Chapter 17 Exercise 7

I am working on Mathematics for Economists by Simon and Blume Exercise 17.7. I know there is an Answers Pamphlet. However, the solution to this question does not make any sense to me. It seems that ...
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1 answer
52 views

What is max here, and how did they derive the first order condition from it?

Hello. Someone sent this on a discord server that I am on, and I couldn't make heads or tails of this. I found the book it is from on studocu; solutions to Cabral's Industrial Organisations, 2nd Ed. ...
2 votes
2 answers
191 views

How effective is progressive tax at regulating monopoly?

I presume that if a company misuses its dominant position, it should be ultimately reflected in unusually high profits. That suggests that a progressive tax could decrease the incentive to charge ...
1 vote
2 answers
217 views

how does monopolisitic competition make profit in the long run in reality

guys, I have this doubt that if the fast food industry such as KFC, and Maccas are examples of monopolistic competition how are they still making a profit? Because as per the model in long run the ...
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2 answers
345 views

Calculating deadweight loss from tax for a monopolist

A monopolist has cost function $c(y) = y$ so that its marginal cost is constant at 1 per unit. It faces the following demand curve $D(p) = \begin{cases} \frac{100}{p}, &\text{if}&p ≤ 20 \\0,&...
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154 views

Optimal production plan in monopol

Suppose a monopolist faces the following demand curve: $𝑃(𝑄) = 120 − 3𝑄$, where $𝑄 = 𝑞_1 + 𝑞_2$. The monopolist has two factories. Factory 1 and factory 2 have the following marginal costs: $$ 𝑀...
5 votes
1 answer
354 views

Monopolies on Giffen Goods

I’m taking an intermediate microeconomics course in college and just got to the topic of monopolies. I know the concept of a Giffen good. As always, Revenue is given by $R= Pq$. Since the monopoly has ...
1 vote
1 answer
723 views

Consumer Surplus Graph

Question: Draw a monopoly graph, with upward sloping marginal cost and on the graph label the area that would be consumer surplus if price were equal to marginal cost, but is producer surplus under ...
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1 answer
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Monopoly markets

A monopoly can produce any output level at a constant marginal (and average) cost of θ per unit. Assume the monopoly sells its goods in two markets separated by some distance. The demand curve in the ...
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Is difficulty for small businesses in an industry seen negatively as approaching monopoly?

I was just curious about fields where it’s hard to break in on a small scale or as a beginner without much expertise. On the one hand, if some organization/entity figured out a way to produce a ...
1 vote
1 answer
44 views

Show that the marginal cost of the total output equals the marginal cost of individual plant's outputs

Assume that the maxima/minima exists wherever referred (i.e., the necessary secondary conditions are satisfied). $p$ is the inverse-demand, $c_i(q_i)$ are the cost functions of the plants that a ...
1 vote
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205 views

How do I find the optimal uniform price for a monopoly?

A monopolist is selling its products in the UK and the EU. The demand for the monopolist's product is Q(UK) = 42 - P and Q(EU) = 16-4P. The cost function of the monopolist is C(Q) = Q^2 where Q = Q(UK)...
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Profit maximization in a monopoly [closed]

Suppose two goods $1$ and $2$ are produced by a monopolist firm. The market demands are $$q_1(p_1, p_2) = a-p_1+bp_2 \tag{1}$$ $$q_2(p_1, p_2) = a-p_2+bp_1 \tag{2}$$ and the cost functions are $c_i(...
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3 answers
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Are monopolies almost always a creation of government intervention?

In this video by John Stossel the libertarian economist Daniel J. Mitchell states the following: ...
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Duopoly Paradox

In these lectures, the professor shows that in a Cournot Duopoly, firms will supply a total market quantity of identical goods between that of a monopoly and that of a perfect competition, while in a ...
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Schumpeterian Growth paradigm

I'm working on a Schumpeterian R&D growth model, and I assume that the quality gap between a new machine and the replaced one, i.e. $\lambda$ is sufficiently large such that I have drastic ...
1 vote
1 answer
82 views

Why does negative derivative of AC with respect to q imply Economies of scale (Monopoly)

In the following Industrial organization exercise form Church and Ware chapter 4 exercise 2 (preliminary info: C(q) = cost function; f = fixed costs; c = marginal costs; q= quantity of goods produced)...
3 votes
3 answers
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Why companies choose to make zero economic profits in the long-term when it can maximize it instead? Why does Apple have large profit margins?

I read that companies in the monopolistic competition make zero economic profit in the long term. Why would a company do that when it can maximize the profit instead? My reasoning is that the former ...
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1 answer
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Doesn't it make sense in terms of economic security for tech companies to support unions?

It seems to me looking across (modern) history that the biggest threat to monopoly is government intervention. It certainly seems true in present times when you have many politicians on the left ...
2 votes
1 answer
126 views

Interpretation of demand and cost curves

I am currently starting on the topic of monopolies in school and I encountered the following scenario: A monopolist faces a demand curve given by $Q = \frac {100} p$ and a cost function given by $C = ...
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2 answers
312 views

Is P > AC under monopoly?

I would like to know why price is greater than average total cost under monopoly. In textbooks, average cost is drawn under monopoly price. However, if the fixed cost is so large, can monopoly get ...
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3 answers
109 views

Does marginal revenue actually refer to marginal revenue per time unit?

When I was learning about why marginal revenue is lower than demand, I referred to this derivation: $$\frac{d(TR)}{dQ} = \frac{d(PQ)}{dQ} = \frac{PdQ + QdP}{dQ} = P + Q\frac{dP}{dQ}$$ Wikipedia ...
1 vote
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63 views

Does Russia export anything that isn't widely available elsewhere?

Some countries produce items for which there is no easy substitute. For example Taiwan produces 53% of the world's semiconductors. Is there any product(s)/service(s) for which Russia is a monopolist (...
1 vote
1 answer
282 views

Is a Monopoly equilibrium also a Nash equilibrium?

Consider a monopoly with price power in the market and the demand is a function of price. Can the result of such a monopoly problem be called a nash equilibrium?
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271 views

How can I compare surplus in monopolistic competition to surplus in monopoly?

Is there any way to compare the total surplus and consumer/producer surplus in monopolistic competition with that of perfect competition or monopoly? All I can come up with is the idea that deadweight ...
7 votes
4 answers
5k views

Do companies have non compete agreements between each other?

Do companies also know for a better lack of words armistice? When searching for non compete agreements everything that comes up are agreements between companies and employees, but do whole companies ...
1 vote
1 answer
158 views

Will there always be excess profit in the Cournot model equilibrium/monopoly

So I'm studying market structures for the end of term, and I'm a bit confused about excess profits. From what I can see, excess profits occur when the demand curve intersects the AC curve - the MR=MC ...
1 vote
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Plot the dependence of the monopolist’s output (Q) on the price ceiling ($\overline{P}$)

Full task condition: A monopolistic firm’s costs are $TC=\begin{cases} 170+20q, \ q>0 \\ 0 \ q=0 \end{cases}$. There are two groups of consumers of equal size in the monopolist’s market: $Q_{d1} = ...
12 votes
4 answers
2k views

Has monopoly theory incorporated network effects as a source of monopoly?

I studied industrial organization for my Econ. Ph.D. four decades ago. At that time industrial organization had no way to incorporate 'network effects' into monopoly theory. With the advent of social ...
2 votes
1 answer
250 views

Price in Second-degree Price Discrimination

In 2nd degree price discrimination, the producer only knows that there are different consumer groups who have different demand curves. He thus adjusts the quantity/quality of the product in a way that ...
0 votes
1 answer
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Shouldn't big tech want to split up?

This is a reference request. Where can I find an analysis that explains why companies like Microsoft and Amazon don't split into two. At a certain point diseconomies of scale would kick in. I would ...
1 vote
1 answer
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Show that slope of MR (marginal revenue) is negative for monopolists

I want to show that the marginal revenue is negative for monopolists. We assume $P(Q)$ is homogenous of degree 1, so it is linear (affine, strictly speaking): $P(Q)=a-bQ$. As we know, $\frac{dP(Q)}{dQ}...
3 votes
1 answer
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Comparative statics of a monopoly

Consider a profit maximising monopolist with linear demand Q(P*) and total production cost C(Q(P*)) who faces a per unit tax t. Suppose the slope of marginal cost is decreasing in some parameter, μ. ...
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Demand Function in monopoly [duplicate]

I am studying monopoly and I see that most exercises use inverse demand. why use the inverse demand function instead of the demand function?
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1 answer
1k views

Why there is no supply on monopoly markets?

We learned in the class that monopoly markets do not have supply curve. Our textbook (Microeconomics and Behavior, page 388 from, R. Frank) says: A monopolist has no supply curve and it explains it ...
3 votes
1 answer
127 views

Efficiency in a market that is both a monopoly and a monopsony

We know that market power in general leads inefficient outcomes (in terms of Pareto efficiency). This makes instinctive appeal as, for example, a powerful seller who has a lot of market power can ...
3 votes
2 answers
32k 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?
1 vote
1 answer
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Profit-maximization for a monopoly

Between two countries, Richland and Poorland, with a strict ban on cross-border sales agreed with the Poorlandian government. The respective demand functions for both countries are: $Q_{poor} = 10 - ...