Question

Explain the economic fundamentals necessary for a monopoly to charge a higher price than if the...

Explain the economic fundamentals necessary for a monopoly to charge a higher price than if the industry was perfectly competitive, but still achieve more total surplus. How would you argue for not breaking up this monopoly to the general population that does not consider itself likely to receive producer surplus?

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Generally, the capability of a monopoly to charge higher prices depends on the elasticity of demand. Low elasticity of demand drives up the price of a good.
Further, under the first-degree price discrimination, the monopoly is able to extract maximum from consumers. Here, the monopoly does not charge a single price from all customers but it treats each individual and charge the price which is equal to the maximum willingness to pay. Here whole consumer surplus is get converted into the producer surplus.

Sometimes the government deliberately promotes such monopoly practices where monopoly is producing equal to the perfectly competitive market. it also reduces the overall cost of production, it could exhibit the feature of natural monopoly.

Add a comment
Know the answer?
Add Answer to:
Explain the economic fundamentals necessary for a monopoly to charge a higher price than if the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • CENGAGE | MINDTAP Aplia Homework: Monopoly 5. Monopoly outcome versus competition outcome Consider the daily market...

    CENGAGE | MINDTAP Aplia Homework: Monopoly 5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S - MC) in the market for hot dogs....

  • 5. Monopoly outcome versus competition outcome sider the daily market for hot dogs in a small...

    5. Monopoly outcome versus competition outcome sider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in he city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S MC) in the market for hot dogs Place the black point (plus symbol) on...

  • 5. Monopoly outcome versus competition outcome Consider thedaily market for hot dogs in a small...

    5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs. Place the black point (plus symbol) on...

  • 1l. If a monopolistically competitive firm is incurring losses, then at the profit-max a price is above the average total cost curve. b. price is below the average total cost curve c. price is equal...

    1l. If a monopolistically competitive firm is incurring losses, then at the profit-max a price is above the average total cost curve. b. price is below the average total cost curve c. price is equal to marginal revenue. d. price is less than marginal revenue. e. average total cost equals marginal cost. Both competitive and monopolistically competitive firms a. can maximize profit by raising price. b. cannot control or set their own price c. can maximize profit by producing to...

  • 17. In order to price discriminate, a monopoly firm must be able to: a separate customers...

    17. In order to price discriminate, a monopoly firm must be able to: a separate customers based on different elasticities of demand b. charge each customer the same price. c. incur a different cost for producing each unit of output. d. all of the above. 18. If DeBeers has a monopoly in the diamond market, then: a. DeBeers must be engaging in perfect price discrimination if it is charging every customer the same price for a diamond. b. the marginal...

  • Please Help Question 5 0.16 pts Markup would not exist in O a monopoly monopolistic competition....

    Please Help Question 5 0.16 pts Markup would not exist in O a monopoly monopolistic competition. O an oligopoly a cartel. O a competitive market. Question 6 0.16 pts prices than can be reached under perfect competition, Despite monopolistic competition results in any other market. variety than can be reached in O higher; less O more inefficient; more excessive O higher; greater O lower: less O lower: greater Question 7 0.16 pts The mayor of Stockville is seeking reelection and...

  • #7 #13-15 #16 #22 #26 please O Resources have higher costs in the short run than...

    #7 #13-15 #16 #22 #26 please O Resources have higher costs in the short run than in the long run. . In the short run, at least one resource is foed in the long run, all resources are variable There are diminishing returns in the short run, but increasing returns in the long run. In the long run all resources are variable in the short run all resources are fred rrect Question 7 0/2 pts Economies of scale may arise...

  • 5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small...

    5. Monopoly outcome versus competition outcomeConsider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power.The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs.Place the black point (plus symbol) on the graph...

  • 5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small...

     5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph...

  • Please answer and explain the steps involved in each. 20. The rate of product transformation refers...

    Please answer and explain the steps involved in each. 20. The rate of product transformation refers to a. how a consumer can trade one good for another while still maximizing his or her utility. b. how a firm can substitute one input for another and still maintain the same production level. c. how production of one good can be substituted for another while still using a fixed supply of inputs efficiently. d. how quickly a firm can produce a final...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT