1. Show graphically and write sentences using the information in the graph to show how the price and quantity chosen by a profit-maximizing price searcher will change when the marginal cost curve shifts downward from a constant marginal cost of $40 at all levels of output to $20 at all levels of output. The demand curve is P=100- Q. MR=MC 100-20= Sentence for Price: Sentence for Quantity: Draw Graph and provide calculations Here. 2. You are a member of the Justice Department. A group of competitive firms in the shoe industry announce that they plan a horizontal merger (a merger of all competitors) that will lead to a monopoly in this industry. Assume that all firms are maximizing profits. The demand for shoes in this industry is characterized by the following inverse demand function: P = 1000 - Q. a. Analyze the impact of the merger in a situation where the marginal costs and average costs of producing shoes are $500 per unit for the firms prior to the merger and they remain at $500 per unit after the merger. Show the before and after situations on the same graph and use sentences to describe how the merger will change the following: 1. the price of shoes li. the quantity of shoes ili. consumer surplus producer economic profits Sentences for: Price: Quantity: Consumer Surplus: Producer Surplus (economic profits): Graph and Calculations Here. b. Analyze the impact of the merger in a situation where the marginal costs and average costs of producing shoes are $500 per unit for the firms prior to the merger and they fall to $50 per unit when the firms are all merged into the single monopoly. Show the before and after situations on the same graph and use sentences to describe how the merger will change the following: 1. the price of shoes the quantity of shoes ili. consumer surplus iv. producer economic profits Sentences for Price: Quantity: Consumer Surplus: Producer Surplus (economic profits): Graph and Calculations Here.3. Compare a situation of market competition, monopoly, and monopoly with first-degree price discrimination on a single graph. Assume that the firms are maximizing profits. Assume that the supply curve for the competitors is the same as the marginal cost curve for the monopoly situations. Draw the Supply Curve (marginal cost curve) with an upward slope. For the three situations compare the price (or prices) charged consumers li. the quantity sold ili. consumer surplus iv. producer surplus V. total gains from trade vi. In which situations will there be deadweight losses? vil. When comparing the single-price monopoly to the first-degree price discriminator, are there any consumers who are better off from the switch to first-degree price discrimination? Graph Here: Fill in the grid Below Competition Single Price Monopoly First-Degree Price Discrimination i. Price (or Prices) Il. Quantity Sold ill. Consumer Surplus Iv. Producer Surplus v. Total Gains from Trade vi. Deadweight Loss vil. Which consumers, if any, are better off under First-Degree Price Discrimination than under the Single Price Monopoly
