WORCESTER STATE UNIVERSITY

$EC110$ Introduction $to$ Microeconomics

Fall $2024$

Homework Assignment #$5$

$Dr.$ Orcutt

Monopoly Market Structure

What $is$ meant $by$ the term "market power"? Can a monopolist charge any price $it$

wants because $itis$ the only seller?

How does a firm operating $as$ a monopolist decide how much output $it$ should

produce $in$ the short run? Use the decision$-$making process when answering this

question.

$If$ the monopolist $is$ earning $an$ economic profit $in$ the short run, will the firm $be$ able

$to$ maintain its economic profit $in$ the long run?

$If$ the monopolist has economic profit equal $to$ zero $in$ the short run, what will the

monopolist most likely $doin$ the long run.

Assume $an$ unregulated monopolist and a perfectly competitive firm face the same

$cost$ structure. Compare the long run results with respect $to$:

$a.$ Price

$b.$ Output

$In$ which market structure will the market price tend $tobe$ higher?

$In$ which market structure will the market output tend $tobe$

higher?

$In$ which market structure $is$ the firm able $to$ earn short run

profit?

$d.$ Long Run Profit

$e.$ Advertising

Monopoly

$f.$ Advertising

Perfect Competition

Will the Monopolist advertise?

$Ifno,$ explain why.

$If$ yes, under what conditions will unregulated Monopolists

advertise?

Will the Perfectly Competitive Firm advertise?

$Ifno,$ explain why.

$If$ yes, under what arrangement will a perfectly competitive

firm advertise?