Spr.2008 Dr. Olmsted
Introduction to Microeconomics Homework # 6
Due: Apr. 22, 2008
Homework instructions: To receive full credit you must staple your homework and answer all questions in order. Answers written on the homework assignment page will not be counted. If you work in a group, turn in one homework for your entire group.
1.Suppose you are the only cement company in town, and the marginal cost of an additional ton of cement is constant at $4.00 and you face the following demand curve:
|
P |
Q |
|
$7.50 |
0 |
|
$7.00 |
10 |
|
$6.50 |
20 |
|
$6.00 |
30 |
|
$ 5.50 |
40 |
|
$ 5.00 |
50 |
|
$ 4.50 |
60 |
|
$ 4.00 |
70 |
a. Graph the firm's total revenue curve.
b. Graph your firm's demand and marginal cost, and marginal revenue curves.
c. What is the profit maximizing price and quantity?
d. What would the price and quantity be if the firm were perfectly competitive?
e. Illustrate on the graph the gains in producer surplus and loss in consumer surplus that result from the firm being a profit maximizing monopoly.
f. What will the dead weight loss be in this case and who will be affected by it?
g. Given that the monopoly solution is inefficient, discuss the possible policy interventions the government might use in this case.
h. Would these interventions increase or decrease efficiency?
2. Examine the list I handed out in class titled: "What do Economists think?"
a. Read proposition 12 and discuss which economic concepts
are of relevance and whether economists are likely to support free market
outcomes in this case.
b. Identify two other propositions addressing the issue of market power.
3. Look at the information given out in class and the following
data chart:
http://www.mindfully.org/Industry/Drug-Industry-GenealogyWSJJul02.htm
and read the following article:
http://judiciary.senate.gov/member_statement.cfm?id=1327&wit_id=2629
a. What happened to the drug industry between 1989 and 2002
(particularly in the last 5 years)?
b. Is this something of concern to Senator Leahy and if so why?
c. What economic concepts does Leahy refer to, that we have also discussed
in class?
Revisit the article about the pharmaceutical industry at the following web
page: http://www.twnside.org.sg/title/twr131n.htm
d . How does the additional information you now have about the structure of
the drug industry change the way you look at the information provided in the
article you read for the last homework assignment?
4. Go to the following web page, http://www.moveon.org/moveonbulletin/bulletin7.html#section-5. From there click on # 4 (Who owns the corporate media) where you will find 5 links. Using the information from these various web pages, answer the following questions:
a. What do the links tell you about media concentration? What
are the 10 largest media companies in the world?
b. What do Disney and GE own, in terms of media and other types of companies?
5. Read the following article:
and http://www.publicairwaves.ca/index.php?page=618
and also explore some of the discussion about the media on the USPIRG web page.
a. What economic concepts/policy options do these authors discuss concerning the media industry?
b. Is media concentration the only issue of concern in discussing media power?
6. Does the USPIRG web page address any other issues we have been discussing in class? If so, how?