Starting from a perfectly-competitive industry, demonstrate what happens in terms of deadweight loss, consumer surplus, monopoly profits and equilibrium price/quantity if the market becomes monopolized.

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Beverley SmithLv2

21 Mar 2019

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A) Suppose the lawn-mowing industry approximates a perfectly competitive industry. Suppose also that a single firm buys all the assets of the lawn-mowing firms and establishes a monopoly. Contrast these two market structures with respect to price, output, and allocation of resources. Would you expect the monopoly to survive? Explain.

B) The Best Computer Company just developed a new computer chip, on which it immediately acquires a patent, and becomes monopoly producer/seller. Show and explain what happens to consumer surplus, producer surplus and the deadweight loss (DWL) if the firm goes from a single price monopoly to perfect price discrimination.

(kindly provide drawn graph as reference)

36) When comparing a monopoly equilibrium to a competitive market equilibrium, the consumer suffers two types of losses. They are A) the deadweight loss due to the output that is produced beyond the competitive level, and the transfer of consumer surplus to the monopolist B) the loss of both consumer surplus and producer surplus. C) a loss of consumer surplus due to the output that is not produced, and the transfer of consumer surplus to the monopolist. D) the deadweight loss due to the output that is produced and the reduced incentive for innovation by the monopolist. E) the deadweight loss due to the output that is not produced and the transfer of producer surplus to the monopolist.

1. Describe deadweight loss in your own word (Describe what is deadweight loss)

2. Which of the following are results regarding monopolies? There may be more than one correct answer.

a. A monopolist faces a perfectly elastic demand curve.

b. A monopolist has market power.

c. The equilibrium price in a monopoly is typically higher than the equilibrium price in a perfectly competitive market.

d. A monopolist has zero profit.

e. A monopolist creates deadweight loss.

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Starting from a perfectly-competitive industry, demonstrate what happens in terms of deadweight loss, consumer surplus, monopoly profits and equilibrium price/quantity if the market becomes monopolized.

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