Purchase Solution

Monopoly and Four Firm Concentration Ratio

Not what you're looking for?

Ask Custom Question

1). Suppose the demand curve for a monopolist is Qd = 500 - P, and the marginal revenue function is MR = 500 - 2Q. The monopolist has a constant marginal and average total cost of $50 per unit.
a). Find the monopolist's profit-maximizing output and price.

b). Calculate the monopolist's profit.

c). What is the Lerner index for this industry?

2). The top four firms in Industry A have market shares of 30, 25, 10, and 5 percent, respectively. The top four firms in Industry B have market share of 15, 12, 8, and 4 percent, respectively. Calculate the four-firm concentration ratios for the two industries. Which industry is more concentrated?

Purchase this Solution
Solution Summary

There are two problems. Solution to first problem describes the steps for finding profit maximizing output, price and maximum profit. It also calculates Lerner Index for the industry. Solution to second problem calculates four firm concentration ratios for two industries.

Solution Preview

Solution:
1) Suppose the demand curve for a monopolist is Qd = 500 - P, and the marginal revenue function is MR = 500 - 2Q. The monopolist has a constant marginal and average total cost of $50 per unit.

a). Find the monopolist's profit-maximizing output and price.
To maximize profits, a monopolist sets his output in such a way that
Marginal Revenue = ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • I am trying to grasp the theory of market concentration and its surrounding theories.

    One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry.

  • Principles of microeconomics

    One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry.

  • effects on market efficiency

    One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry.

  • effects on market efficiency

    One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry.

  • Industry structure and CR Ratio

    241242 Four-Firm Concentration Ratio Industry structure is often measured by computing the Four-Firm Concentration Ratio. Suppose you have an industry with 20 firms and the CR is 30%. How would you describe this industry?

  • Four-Firm Concentration Ratio

    Sometimes monopoly is achieved by the merger of major players in the market. By merger they reduce competition and gain the power to influence the prices. The reasons for low four-firm concentration ratio are 1.

  • Four-Firm Concentration Ratio

    It lists possible reasons for low and high Four-Firm CR ratio.

  • Measures of Concentration and Herfindal Index

    A four-firm concentration ratio of 90 percent means the largest four firms account for 90 percent of sales.

  • Monopolies & oligopolies

    An example would be the supermarket industry in the United Kingdom, with a four-firm concentration ratio of over 70% and the brewery industry also in the U.K has a four firm concentration ratio of a staggering 85%.

  • Market Structures and Concentratio Ratio

    There are two measures of concentration - the four-firm concentration ratio and the Herfindahl-Hirschman Index.

View More Related Solutions