Perfect Monopoly

Question 1

You may use any outside resources in order to complete it. Simply copying answers from any source, including the textbook or notes, will not be greeted with a high grade. Ignoring parts of a question is not an advisable strategy. The exam will be graded for the accuracy and precision of the economic and mathematical arguments and evidence provided. The grading will also incorporate your proper command and usage of the English language.

1. Explain how the producer problem evolved throughout this course. Your answer should include an explanation of the three or four different specifications of the problem itself and brief descriptions of PPFs, cost curves, and revenue functions. You do not need to address the differences between monopoly and perfect competition here (that’s problem 2). Feel free to incorporate graphs, drawings, and diagrams relevant to the problem. Use made up prices and production capabilities if you wish, too.

2. Explain the similarities and differences between the industrial organizations of perfect competition and monopoly. This explanation should start with the different assumptions about them and then segue into the different conclusions reached about pricing, production, profits, and consumer surplus due to those different assumptions. Similarities can also be discussed throughout your response. Graphs would be helpful.

Question 2

Assume the government has removed all entry restrictions in an industry resulting in the creation of a perfectly competitive marlet structure. Using demand and supply graphs and cost curves illustrate and explain how this move will impact on the long run profit of these firms.