Questions tagged [monopoly]

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

Filter by
Sorted by
Tagged with
6
votes
1answer
219 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 ...
3
votes
1answer
50 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 ...
3
votes
2answers
4k 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 ...
2
votes
2answers
938 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 ...
2
votes
1answer
189 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 ...
4
votes
2answers
17k 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?
4
votes
1answer
214 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 ...
0
votes
2answers
306 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 ...
1
vote
2answers
404 views

Cournot Model Monopoly example

Good day In my Microeconomics course, we are handling the 4 imperfect competition models. Currently we are discussing the Cournot Model, however I am unsure about a certain example. This is given as ...
0
votes
1answer
540 views

Monopoly's MC, AVC and TVC

I do not quite understand the statement "total variable cost is the area under the marginal cost curve" Does it means MC inserts at the AVC at the lowest point (see picture)? But why AVC is drawn and ...
2
votes
1answer
225 views

What exactly is a trust?

In my history class, we're studying the Industrial Revolution and how Rockefeller came to dominate the oil industry with his Standard Oil company. According to our textbook, a man named Samuel Dodd (...
1
vote
0answers
34 views

Is anti-competitive behavior a threat in a society with free trade and no regulation?

A question that I have is whether a truly economically free society needs to (or should) have laws against anti-competitive behavior. Take liquor distribution as an example. In the United States ...
1
vote
0answers
194 views

How to compute Social Welfare in this model?

The first part of this scientific article analyzes reward-based crowdfunding. The assumptions are: Seller is a monopolist Unit mass of consumers Unit demand Two periods Individuals are identified by $...
3
votes
1answer
1k views

Why does demand curve shift in, in a monopolistic competitive market?

In a monopolistic competitive market, demand curves shift in, if more firms enter the market. I can't seem to wrap my head around it. Demand remains the same, supply has increased. Shouldn't entry of ...
1
vote
0answers
80 views

Menu-pricing with three consumer groups

I want to analyze the following setting: An entrepreneur (with monopoly power) sells a product in two periods. In period 1 there are two consumer groups (denoted by 1 and 2) and in period 2 there is ...
-1
votes
1answer
7k views

Calculate deadweight loss from cost and inverse demand function in monopoly [closed]

Consider a monopolist with inverse demand p = 200 - 2*q. The firm's total cost function is C(q) = 100 + 20*q. What is the deadweight loss of monopoly? To my understading, since we don't have any ...
2
votes
2answers
171 views

Effect on monopoly price

Suppose a monopolist adopts a technology that allows him to produce his product at lower cost. What is the likely effect on the monopoly price ?
4
votes
2answers
10k views

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

So 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 monopoly's face a lack of competition, they have no incentive to improve ...
2
votes
1answer
175 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 ...
3
votes
2answers
779 views

What are examples of natural monopolies that don't have overwhelming economies of scale?

On wikipedia, I read that the currently-used formal definition of a natural monopoly is where “[a]n industry in which multi-firm production is more costly than production by a monopoly”. I tried ...
1
vote
2answers
57 views

Articles about police complaints for a lit review?

I'm doing a research paper about how different cities have different quality of police service. I want to do a regression where the dependent variable is number of sustained complaints per 10 officers ...
1
vote
2answers
133 views

In which market structure does the consumer has almost zero knowledge about the good?

Consider goods that are almost identical (e.g. cement) and require technical knowledge to understand their merit, which an ordinary consumer might not possess. What then is the feature characteristic ...
1
vote
0answers
80 views

A high store loyalty indicates what kind of competition among cement retailers selling products of the same brand?

To provide some context, this question occurred to me while I was considering the cement retail market. If one considers retailers selling cement of only one brand, then the concept of brand loyalty ...
0
votes
1answer
60 views

Monopoly Profits [closed]

Have a question: In the town of Johnson, there are 100 identical citizens and one bus company. The bus company is owned by the citizens, each of whom receives 1% of the bus company’s profits. Nobody ...
1
vote
1answer
58 views

Will there be any competition amongst cement retailers?

If we consider a cement manufaturer in a given country, say India, then will the cement retailers of that companies' product compete with each other? And if so, then what kind of a competition will it ...
1
vote
2answers
406 views

How does monopoly affect the informational role of price?

It is said in the textbook "Intermediate Microeconomics a Modern Approach" by Hal Varian that monopoly affects the informational role of price. What's the mechanism?
7
votes
2answers
2k views

Why don't consumers subsidize monopolies?

Monopolies don't maximize welfare because they set prices above the equilibrium price, leading to dead-weight loss. It is possible for the government to provide a per unit subsidy to a monopoly until ...
1
vote
3answers
220 views

Is the economic behaviour of a competitive market as a whole the same as a monopoly market?

We know that the price-setting mechanics and individual firm's behaviour in a competitive market are different with those of monopoly powers'. However, the demand curves of both competitive market(as ...
6
votes
3answers
833 views

What are good books about monopolies and market failures?

Is there a good undergraduate level book specifically about economic monopolies and market failures?
3
votes
1answer
237 views

Monopoly second degree discrimination - two part tariff

In a Monopoly with second degree discrimination - two part tariff will the consumer with higher demand always pay a higher entrance fee and lower unit price than the cunsumer with lower demand or is ...
2
votes
0answers
177 views

The pricing of complementary goods if one of them is purchased only once

Sorry for asking a homework question, however, I'll try to generalize it as much as possible for a future use. There are two complementary goods (A and B). B is produced under perfect competition, ...
1
vote
1answer
102 views

When a demand function is split, how do we algebraically change function

For example, in tacit collusion for a Bertrand situation, demand would be split between the two colluding firms. How would the reflect upon the demand function? For example D = 100 - 2Q, and for ...
1
vote
3answers
499 views

Why is market power presumably high when goods are fungible and demand relatively inelastic?

What does the fact that the goods in an industry are fungible add to a market power analysis if you already know demand is relatively inelastic?
1
vote
1answer
178 views

Approximating the socially-optimal price in a monopolist market

A monopoly firm has an incentive to increase the price and decrease the produced quantity in order to increase its revenues. But this decreases the social welfare. The government can intervene in ...
2
votes
2answers
167 views

Help trying to find Economic Profit for a Monopoly

I'm given a demand function ( $p = 60-.002q$), Marginal Cost (\$10) and Fixed Costs (\$300,000) for a monopoly. I've figured the profit maximizing output and price: Marginal revenue function $MR = ...
7
votes
4answers
1k views

Can destruction be profitable?

We often see news that some company destroys items they couldn't sell in time. Also we can see news of supermarkets destroying food just because it's not fresh although it's perfectly edible. If ...
3
votes
1answer
166 views

Monopoly with price discrimination

A city has a single electricity supplier. Electricity production cost is $c$ per unit. Utility function $U(q,t)=a\ln(1+q) - t$, where $q$ is electricity consumption and $t$ is electricity tariff. What ...
2
votes
1answer
16k views

Why is AC = MC in the monopoly?

Using the Microeconomic Theory Basic Principles and Extensions, Nicholson, W. and Snyder, C., I've reached to the point where Monopoly and Imperfect Competition is discussed (Chapter 14 and 15 to be ...
5
votes
3answers
947 views

Clarification about Market Structure Oligopoly or Monopoly

As per the definition i found in the internet, Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. Monopoly, where there is only ...
1
vote
2answers
2k views

How does the monopoly's deadweight loss affect market surplus and the economic pie?

Source: p 312, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw Welfare in a monopolized market, like all markets, includes the welfare of both consumers and producers. Whenever a consumer ...
7
votes
1answer
1k views

Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
6
votes
2answers
102 views

Modelling Pay what you want

I have been trying to model a Pay What you Want scheme. Now, for a monopoly it is clear that monopoly will have more profit by setting monopoly pricing assuming all players are selfish. But consider a ...
8
votes
1answer
367 views

For what demand function is a monopoly most harmful?

Consider a firm with zero marginal cost. If it gives the product for free, then all the demand is satisfied and the social welfare increases by the maximum possible amount; call this increase $W$. ...
4
votes
2answers
3k views

Monopoly pricing under constant elasticity of demand

While reading Ch. 24-Monopoly from Intermediate Microeconomics by Hal Varian (8 th edition), on pg. 441, he writes that a monopolist will never choose to operate where the demand curve is inelastic. I ...
22
votes
3answers
3k views

Why is collective bargaining by a group of employees not the same thing as price-fixing?

Employees sell their labor for wages. If a critical mass of employees get together and demand higher wages, how is this not the same thing as a critical mass of merchants illegally fixing the price of ...
4
votes
3answers
3k views

Monopoly firm's block pricing strategy making max. profit

I have question about max. profit condition for monopolist block pricing. I learned that to maximize profit in block pricing, given a linear demand curve function and constant MC, calculate $Q_2(...
4
votes
1answer
101 views

Is there a class of demand functions that deliver equal surplus to consumers and a monopolist?

Consider a market with a monopolist firm that has zero marginal cost and faces demand $D(p;\mathbf{a})$, where $\mathbf{a}$ is a vector of parameters and $p$ is the price. The monopolist maximizes ...
11
votes
3answers
475 views

Price discrimination- how much is optimal?

I am of the understanding that as a general rule, price discrimination does not benefit consumers. Yet I can think of a situation where it does. Look at two countries, Australia and India. The price ...
5
votes
4answers
652 views

The Backward Bending Supply Curve, Asymmetric Information, and Monopoly

This recent question about when monopoly is undesirable made me curious about when monopoly is actually desirable? I was reminded of an argument for the efficiency of monopolies when moral hazard ...

1 2