Assignment (Economics) Example | Topics and Well Written Essays - 500 words - 4

(Economics) - Assignment Example As the equilibrium price is higher with a monopoly, consumer surplus will be lower than it would be under competition. If the NPS values consumers more than firms, the monopoly outcome may not be desirable. With only one firm, there may be efficiency gains. For example, it may be that the firm needs to employ fewer employees to service all of the visitors to Yosemite relative to the combined number of employees given competition in the market. Hence average total costs may be lower with only one firm. It is therefore possible that the firm posts lower prices and sells more units yielding a surplus to society. 4. Monopolistic competition has some of the same characteristics as monopoly and some of the same characteristics as perfect competition (hence the name "monopolistic competition"). List a few of these similarities. Perfect Competition: Economic profits tend to be eliminated in the long run, the relatively free entry of new firms, the long‑run price and output behavior, zero long-run economic profits, and have many buyers and sellers. The entry and exit of firms in monopolistic competitive firms will eventually cause each firms economic profits to fall to zero. Hence, eventually, each firm earns normal profits, i.e. profit = 0. When some firms earn positive economic profits at one time, new firms will end up entering the market and the increased competition will reduce all firms economic profits to zero. 7. Complete this statement by filling in the blanks with the words "increase" or "decrease": The entry of an additional firm in a mon. comp. market decrease the profit per unit of output because entry increase the price and increase the average cost of production. 8. Consider the Utica Slappers, a hockey team that plays in an arena with 8,000 seats. The only cost associated with staging a hockey game is a fixed cost of $6,000: The team incurs this cost regardless of how many people attend a game. The demand curve for hockey tickets has a slope of