2.3 The U.S. Postal Service (USPS) has a constitutionally guaranteed monopoly on first-class mail. In 2015, it
Question:
2.3 The U.S. Postal Service (USPS) has a constitutionally guaranteed monopoly on first-class mail. In 2015, it charged 49¢ for a stamp, which was not the profit-maximizing price—the USPS’s goal, allegedly, is to break even rather than to turn a profit.
Following the postal services in Australia, Britain, Canada, Switzerland, and Ireland, the USPS allowed Stamps.com to sell a sheet of twenty 49¢ stamps with a photo of your dog, your mommy, or whatever image you want for $22 (that’s $1.10 per stamp, or a 224% markup). Stamps.com keeps the extra beyond the 49¢ it pays the USPS. What is the firm’s Lerner Index? If Stamps.com is a profit-maximizing monopoly, what elasticity of demand does it face for a customized stamp?
Step by Step Answer:
Managerial Economics And Strategy
ISBN: 9780135640944
2nd Global Edition
Authors: Jeffrey M. Perloff, James A. Brander