Author Question: Assume that we are concerned about the existence of one firm (monopoly) in a market because of the ... (Read 45 times)

Yolanda

  • Hero Member
  • *****
  • Posts: 757
Assume that we are concerned about the existence of one firm (monopoly) in a market because of the potential for economic profits. If, however, there is free entry and exit, should our concerns change? Why or why not?
 
  What will be an ideal response?

Question 2

In the 1970s a typical college student's consumption might be represented by the following items: a small used car, black and white television set, macaroni and cheese and generic brand beer.
 
  As many of these students graduated from college what do you expect happened to the composition and quantity of the goods mentioned? Explain.



juicepod

  • Sr. Member
  • ****
  • Posts: 310
Answer to Question 1

Yes. If a market is contestable the firm cannot use its monopolistic position because the profits will entice entry, which will force the firm to lower its price.

Answer to Question 2

In all likelihood the consumption of these items either dropped off dramatically or disappeared altogether. The reason is that these items are what economists would classify as inferior goods. As these college students graduated and started to earn more income their demand for these goods fell. It is likely that the composition of goods in their bundle would move towards more normal goods.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The most destructive flu epidemic of all times in recorded history occurred in 1918, with approximately 20 million deaths worldwide.

Did you know?

Every flu season is different, and even healthy people can get extremely sick from the flu, as well as spread it to others. The flu season can begin as early as October and last as late as May. Every person over six months of age should get an annual flu vaccine. The vaccine cannot cause you to get influenza, but in some seasons, may not be completely able to prevent you from acquiring influenza due to changes in causative viruses. The viruses in the flu shot are killed—there is no way they can give you the flu. Minor side effects include soreness, redness, or swelling where the shot was given. It is possible to develop a slight fever, and body aches, but these are simply signs that the body is responding to the vaccine and making itself ready to fight off the influenza virus should you come in contact with it.

Did you know?

Street names for barbiturates include reds, red devils, yellow jackets, blue heavens, Christmas trees, and rainbows. They are commonly referred to as downers.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Did you know?

In 2006, a generic antinausea drug named ondansetron was approved. It is used to stop nausea and vomiting associated with surgery, chemotherapy, and radiation therapy.

For a complete list of videos, visit our video library