Monopoly and Fair Return

Chapter 10 (Tentative Due Date by November 1) headland 2 Discuss the major restrictions to entry into an labor. Explain how each barrier can foster either monopoly or oligopoly. Which barriers, if any, do you feel lend rise to monopoly that is socially merelyifiable? LO1 The major barriers to entry in an manufacturing argon economies of measure, legal barriers such(prenominal) as patents & licenses and separate strategical or pricing barriers. Economies of scale occur only in tumescent rigids who ar able to reach a minimum efficiency scale speckle and operate at that point for a long period.This high school TC results in a low ATC and high efficiency. Once a huge smashed innovates, it protects that very idea or increase done patents disallowing other firms to copy their product. Government licensing could also result in throttle entry of firms because they might not provide permission for another firm to enter the marketplaceplace. Another means to reduce comp etition within an industry is to manipulate footing. Monopolists, being a price setter, could slash their price just to make it tougher for their competitor to survive.Other strategic regularitys could include increased advertisement to a take where the lesser and smaller firms will find impossible to cope against. These barriers of entry can prove to be pertinent for the existence of a pure monopoly. The absence of more or less of these barriers would lead away to a market structure resembling an oligopoly or perhaps even a monopolistic matched industry if the compute of firms was to be large. And in the case where there are no barriers a stringently competitory market would appear.But definitely some barriers are within legal rights. For example a patent protects the product for a number of years and its understandable that a monopoly would neediness to restrict the usage of their research and hard work. Similarly if the price slashes are pushing out competition, they are at the same team encouraging competitors to reduce their costs/price which is great for the consumers and the market in general. capitulum 3 How does the requirement curve faced by a purely monopolistic seller differ from that confronting a purely competitive firm?Why does it differ? The learn curve of a purely competitive firm is horizontal because it has perfect substitutes and a very large number of firms. The demand curve is perfectly elastic and hence horizontal. On the other a pure monopolys demand curve is d consumeward slanted because market demand is not perfectly elastic. The monopolist is the industry and its demand curve is hence the market demand curve. The difference in characteristics such as number of firms, types of product and barriers to entry cause the distinguished demand curve.Question 9 Explain verbally and graphically how price (rate) convening may improve the performance of monopolies. In your answer distinguish between (a) socially optimal (marginal? cost) pricing and (b) fair? hand (average? total? cost) pricing. What is the dilemma of convention? LO5 Thinking of a firm operating at a point where ATC is still falling. Each small firm would produce a untold smaller output at a higher ATC. So competent and lowest-cost production requires a single seller. This is represented in the graph abandoned and named Graph 1. The monopoly could charge any price they choose.One option is to charge the socially optimal price where price equals marginal cost. This is the allocatively efficient output level where all marginal benefits exceed marginal cost. An alternative pricing method is the fair return theory where price is equal to ATC. Under this achievement the monopoly is able to break even and continue operation. A fair return is equal to normal clear. The dilemma of regulation is caused by these very regulation methods. These regulatory measures which are set to achieve the most efficient parceling of resources in P=MC actually result in the monopoly reservation a loss.Similarly the problem with the fair return price is that it doesnt only solve the issue of under-allocation. Question 11, LAST WORD How was De Beers able to run into the world price of diamonds even though it produced only 45 share of the diamonds? What factors ended its monopoly? What is its new strategy for earning economic profit, rather than just normal profit? Despite producing 45% of the diamonds, De Beers was able to control the world price due to the ability to control its own production levels and high market share.The fact that so many diamond suppliers were coming through and providing alternatives such as synthetic diamonds forced De Beers to invest in advertising and promoting their own diamonds. These were factors simply out of De Beers control. More diamond reserves were being spy and caused competition. So De Beers was forced to stop its operation as a monopoly and rather as the diamond supplier of choice. Problem 1 v enture a pure monopolist is faced with the demand schedule shown below. bet the missing total? revenue and marginal? revenue amounts. presume that MC is $39, desexualize the profit? maximizing price and profit? maximizing output for this monopolist. Assuming that the ATC is $52. 50, what is the monopolists profit? Verify your answer by canvas it to the Total Revenue -Total Cost approach. LO2 Total Revenue from top to bottom, in dollars 0, 100, 166, 213, 252, 275, 288, 294, 296, 297, 290 Marginal Revenue from top to bottom in dollars 100, 66, 47, 39, 23, 13, 6, 2, 1, -7 The profit maximizing price is $63 and profit-maximizing output is 4. Monopolists profit is TR-TC=252-(4*52. 50)=>252-210=$42