Economics - McConnell Flynn - 19 edition. Chapter 10. Textbook solutions

10.1 “No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist.”Do you agree? Explain. How might you use Chapter 4’s concept of cross elasticity of demand to judge whether monopoly exists?
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10.2 Discuss the major barriers to entry into an industry. Explain how each barrier can foster either monopoly or oligopoly. Which barriers, if any, do you feel give rise to monopoly that is socially justifiable?
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10.3 How does the demand curve faced by a purely monopolistic seller differ from that confronting a purely competitive firm? Why does it differ? Of what significance is the difference? Why is the pure monopolist’s, demand curve not perfectly inelastic?
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10.4 Use the demand schedule below to calculate total revenue and marginal revenue at each quantity. Plot the demand, total‐revenue, and marginal-revenue curves, and explain the relationships between them. Explain why the marginal revenue of the fourth unit of output is $3.50, even though its price is $5. Use Chapter 4’s total‐revenue test for price elasticity to designate the elastic and inelastic segments of your graphed demand curve. What generalization can you make as to the relationship between marginal revenue and elasticity of demand? Suppose the marginal cost of successive units of output was zero. What output would the profit‐seeking firm produce? Finally, use your analysis to explain why a monopolist would never produce in the inelastic region of demand....
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10.5 Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact on income transfers. Since both monopolists and competitive firms follow the MC = MR rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference?
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10.6 Critically evaluate and explain each statement:a.  Because they can control product price, monopolists are always assured of profitable production by simply charg­ing the highest price consumers will pay.b. The pure monopolist seeks the output that will yield the greatest per-unit profit.c. An excess of price over marginal cost is the market's way of signaling the need for more production of a good.d. The more profitable a firm, the greater its monopoly power.e. The monopolist has a pricing policy; the competitive producer does not.f.  With respect to resource allocation, the interests of the seller and of society coincide in a purely competitive market but conflict in a monopolized market.
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10.7 Assume a monopolistic publisher has agreed to pay an author 10 percent of the total revenue from the sales of a text. Will the author and the publisher want to charge the same price for the text? Explain.
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10.8 U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing reimportation of drugs to the United States.
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10.9 Explain verbally and graphically how price (rate) regulation may improve the performance of monopolies. In your answer distinguish between (a) socially optimal (marginal cost) pricing and (b) fair-return (average-total-cost) pricing. What is the “dilemma of regulation”?
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10.10 It has been proposed that natural monopolists should be allowed to determine their profit-maximizing outputs and prices and then government should tax their profits away and distribute them to consumers in proportion to their purchases from the monopoly. Is this proposal as socially desirable as requiring monopolists to equate price with marginal cost or average total cost?
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10.11 LAST WORD How was De Beers able to control the world price of diamonds even though it produced only 45 percent of the diamonds? What factors ended its monopoly? What is its new strategy for earning economic profit, rather than just normal profit?
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