Explore BrainMass

Explore BrainMass


    An industry that is controlled by a monopolist is called a monopoly. A monopolist is a firm that is the only producer of a certain good that has no close substitutes. In most cases, a monopolist will increase the price and reduce production in order to gain abnormal economic profits. When a monopolist raises the competitive price of a good, they are exercising market power. However, since the monopolist is restricted by market demand, an increase in price will cause quantity demanded to decrease. Although unrestricted by competition, the monopolist is still restricted by the market. Monopolies are rare in modern day, but can be caused as a result of large mergers, government regulation or naturally. 

    Natural monopolies are those where the market cannot support two firms, so one firm exits the market. Natural monopolies will often emerge when there are large fixed costs that are associated with production. An example of natural monopolies are local utilizes like water and gas. Monopolies emerge when parts of the industry keep other firms out, also called barriers to entry. There are four types of barriers to entry:

    1. Network externalities
    2. Economies of scale
    3. Control of scare resource
    4. Legal barriers to entry

    One of the issues with a monopoly is that there is usually a high amount of inefficiency due to the artificial lowering of quantity produced in order to raise prices. A market under monopoly is typically not allocatively efficient and exhibits deadweight loss. Sometimes monopolists argue that they actually reduce prices because without market segmentation they can leverage their large market share to use economies of scale to reduce the costs of production. 


    1. Ragan, Chrisopher. Macroeconomics/Christopher T.S. Ragan, Richard G. Lipsey. – 13th Canadian ed. 
    © BrainMass Inc. brainmass.com February 6, 2023, 2:03 pm ad1c9bdddf

    BrainMass Solutions Available for Instant Download

    Determine the optimal prices for weekdays and weekends

    As a manager of a chain of movie theaters that are monopolies in their respective markets, you have noticed much higher demand on weekends than during the week. You, therefore, conducted a study that has revealed two different demand curves at your movie theaters. On weekends, the inverse demand function is P = 30 − 0.002Q; on

    Monopolistically competitive industry

    See attached. I need assistance in the following: a. Identify the following on the graph and calculate i. Profit-maximizing output level ii. Profit-maximizing price iii. Total revenue iv. Total Cost v. Total profit or loss b. What is likely to happen in this industry in the long run?

    Monopolist Profit Maximization After Tax and with Price Ceiling

    Se the attached file. Consider a monopolist facing a market demand curve given by q = 186- p(q). The monopolist's fixed costs and variable costs are equal to Cf = 2400 and C(q) = q2 /10 +10q, respectively ........(in the latter equation its actually q squared over ten plus ten q) Calculate: a) the monopolist's price-qua

    Monopoly: Benefits

    According to DeMarco (2001), it is a common view that monopolies are not only economically objectionable, they are also ethically objectionable. Operating like a command-like structure, the monopoly blocks competition and distorts the markets natural mechanism's such as the ability to self-organize and self-correct. As we h

    Discounts :Monopoly Vs Competition

    Do you agree or disagree with the following statement, "Only a competitor would offer discounts to selected customers, because a monopolist can always require his customers to pay full price." Carefully Explain.

    Price discrimination in case of patented products

    Many firm have patents giving them monopoly power; yet, many do not price discriminate across state boundaries. Almost surely there are differences in price elasticity of demand across states. Why don't most manufacturers take advantage of this opportunity? Carefully Explain.

    Monopoly Vs Perfect Competition

    Suppose your firm has the opportunity to purchase either of two drugstores. One is the only drugstore in a small town and the building inspector there has guaranteed that no additional drugstores will be permitted. The second is a drugstore in a large city where there are hundreds of competitors. Is the purchase of the monopo

    Monopolistic Competition in a Detergent Market

    The companies in the detergent market closely fit the mold of a monopolistic competitive firm. Research a company in this market and explain how it fits some of the characteristics of a monopolistic competitive firm.

    Oligopolies and Monopolies

    Are monopolies and oligopolies always bad for society? Please provide real world examples of where this may be the case.

    Earning profit in a monopolistically competitive market

    If firms are earning economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run? Select one: a. New firms will enter the market, thereby eliminating the economic profit b. Firms will continue to earn economic profit c. Firms will join together to keep other

    Economics: Herfindahl-Herschman Index (HHI)

    Please help answer the following problem. Assume an industry is composed of the following eight firms. Company Market Share Firm A 30 percent Firm B 25 percent Firm C 15 percent Firm D 10 percent Firm E 7 percent Firm F 6 percent Firm G 4 percent Firm H 3 percent a. If Firms B and C propose a merge, would the A

    Cournot and Pricing Strategy

    1. Suppose that in a perfectly competitive industry the equilibrium industry quantity is 10,000 units. Suppose that the monopoly output is 5,000. For a 2-firm Cournot Oligopoly (N =2) known as a duopoly, what is a likely Cournot QUANTITY for the industry? a. 3, 000 units b. 5,000 units c. 6,667 units d. 10,000 units e. 1

    Industry qualified in a competitive market

    1. Is the online book retail (e.g. Amazon.com) industry qualified as a perfectly competitive market by the four market characteristics listed in the lecture note? If not, what characteristic(s) is (are) not met? 2. There are so many companies having websites to sell their products. However, not every company is successful in

    Excess Profit Tax

    Is it good to have an excess profit tax? Do unexpected monopolistic profit serve any useful function in the market economy?

    Microeconomics: Competition

    Please help answer the following problems. Imagine that you have recently purchased a franchise pizza restaurant. 1. In what type of market do you think your franchise operates (perfectly competitive, monopoly, monopolistically competitive, oligopoly)? What are the specific characteristics that make it this type of firm?

    Competition and Market Power

    1. Explain the difference between the demand curve facing a monopoly firm and the demand curve facing a perfectly competitive firm. 2. Name one monopoly firm you deal with. What is the source of its monopoly power? Do you think it seeks to maximize its profits? 3. There are four basic types of firms: (a) perfectly competi

    Describing the pattern of change in the market for IBM from oligopoly to monopoly

    I need help with describing a pattern of change in the market for IBM (Monopoly, oligopoly), and hypothesize short run/long run behaviors for the market model. I also would like to break down the major factors that impact the degree of competitiveness using data. Upon those findings, research two competitors that are the closest

    Price Elasticity in Real Life Situations

    Please help understanding elasticity in application to real life situations, instead of just theoretical. 1) If own price elasticity for demand is -0.25, what percentage would you change the price of a good to change consumption of this good by 10%? Would this change in price be an increase or decrease? Is this demand elastic

    Determine the optimal output and price combination in the given cases.

    Industry demand is given by: Q = 660 - P [with the proviso that Q must be at least 20] All firms in the industry have identical cost structures. The industry's total cost has fixed cost of 6000 and constant variable cost of 50. Calculate the following: a) If the industry is perfectly competitive, what will industry out

    Oligopoly, Monopoly, Competitive Markets and Firm Costs

    Please explain these questions: Is it false that the defining characteristic of oligopoly is that each firm is mutually interdependent? Is it true that a price discriminating monopolist charges the same price to everyone? (Be sure to point out that a price discriminating monopolist must be the only seller in the market.). I

    Calculating The Optimal Output of a Competitive Firm

    It is assumed that the liquid soap market is perfectly competitive and the current price of a case of liquid soap is $42.00. The firm has estimated it's marginal cost function to be as follows: MC=0.006Q. 1. Calculation for # cases to maximize profits with example. 2. What happens if the firm unilaterally raises prices in

    Monopoly Price and Profit-Maximizing Output

    Suppose that a monopoly faces an inverse market demand function: P = 100-2Q and its marginal cost function is: MC = 40 - 2Q. a. What should be the monopoly's profit-maximizing output? b. What is the monopoly's price?

    Finding costs and maximizing profits for a monopoly

    A monopolist has demand and cost curves given by: Q = 1000 - 2P TC = 5,000 + 10Q Find average cost (AC), average variable cost (AVC), marginal cost (MC), marginal revenue (MR). a. What is the quantity that maximizes profit? What is the revenue and profit at that point? b. What is the quantity that maximizes revenue? Wh

    Profit Maximizing in the Market for Air Travel

    Formerly, the market for air travel within Europe was highly regulated. Entry of new airlines was severely restricted, and air fares were set by regulation. Partly as a result, European air fares were higher than U.S. fares for routes of comparable distance. Suppose that, for a given European air route (say, London to Rome), ann

    Company is being accused of monopoly behavior

    You work for a company that is being accused of monopoly behavior, given its large size. Comparisons are made to the industry standard, where each establishment has on average about 15.1 employees. Your company is quite a bit bigger than that, but you want to provide evidence against these monopoly charges. a. You've collecte

    Do the print media have a future?

    The problems that the print media are facing are all too common; loss of customer base, loss of advertising revenue, etc. Some major newspapers have shut down the doors, some are struggling dearly (i.e., New York Times). At the same time, the online media outlets are flourishing. Explain in terms of economic concepts that you

    Regulatory Issues

    In Figure 27.2, ( a ) How much profit does an unregulated monopolist earn? ( b ) How much profit would be earned if MC pricing were imposed? 2. Do total profits (A) decrease, (B) increase, or (C) stay the same when new te