9) For the Pure Monopoly Market Structure 2 a) Explain how the monopolist determ

Question

9) For the Pure Monopoly Market Structure 2

a) Explain how the monopolist determines the profit maximizing level of output and price. Be specific.

i) Please use what you have learned about using the MR MC approach along with the use of the appropriate cost curves to create your answer.

b) You are employed by a firm with monopoly power. The boss wants to increase profits. Explain the power of price discrimination to your boss. Discuss the requirements and assumptions for successfully implementing this approach, and the likely outcomes.

i) You should explain price discrimination and its 3 forms, the conditions for price discrimination, and the outcomes of price discrimination for the Pure Monopolist.

c) You work for the government in the department that is responsible for dealing with Monopoly issues. Please explain the dilemma of regulation. Please be thorough.

i) Using the information, you have learned about monopoly and how it is viewed by government; please the nature of the dilemma, along with the 3 choices and the implications of those choices.

Explanation / Answer

First question 10(a) is answered below.

Kindly ask rest questions in another post.

A monopoly firm is the single most seller in the market selling a product (not easily substitutable) to a large number of buyers. The firm makes high barriers to entry so as to avoid competition. It has complete control over the market and operates for profit maximization purpose by setting MR=MC

MR refers to Marginal revenue i.e. the extra revenue earned by selling an extra unit of output. MC refers to Marginal cost i.e. the extra cost incurred by selling an extra unit of output.

By setting MR=MC, profit is maximized. This happens because if MR>MC then the producer will try to increase sales till the point MR=MC and if MR<MC, then the producer will stop production and sales till the point MR=MC.

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