Unfair Practices against the Public Interest - Essay Example

Utilities such as water, gas, and electricity are some of the examples of natural monopolies. The government must set price ceilings in national monopoly markets since products and services under this category are necessities that people may buy at any higher prices.4. In both cases, profit must be zero in the long-run equilibrium. Firms are affected by changes in demand conditions under both cases. A major similarity between monopolistic competition and perfect competition is that competition in pursuit of profit encourages efficient resource movements.5. In the case of a monopolistically competitive firm, demand will increase and the average cost will increase in the long run.

Under such circumstances, monopolistically competitive firms end up making zero economic profits. 6. A monopolistically competitive firm chooses the level of output where marginal cost equals marginal revenue. The firm maximizes its profits so as to achieve this situation; and it is called the short-run equilibrium of the firm. This condition adds to the price fixation flexibility of the firm. Moreover, it enables the firm to rapidly adjust with unexpected market fluctuations. 7. The entry of an additional firm in a non-competition market decreases the profit per unit of output because entry decreases the price and increases the average cost of production.8. a.

According to the given combination, $6 will maximize the profitWhen the price per ticket becomes $6, the number of tickets will be 6000.Then the total revenue becomes, $6 ×6000 = $36,000Hence, profit is $36,000 (total revenue)-$6000 (fixed cost) = $30,000.b. We saw that profit will be maximized if the quantity of tickets is 6,000Then the vacant seats will be 8,000 (total seats) - 6,000 = 2,000c. It is rational to leave some seats empty if it maximizes the profit; since the team incurs the fixed cost regardless of the number of people.9. a.

RTE cereals are very close substitutes for one anotherb. The availability of different varieties of breakfast cereals gives an opportunity for consumers to distinguish them on the ground of their quality and price. It also gives consumers a chance to buy their most preferred variety. c. The consumers may be misrepresented by the marketer when large varieties of breakfast cereals are available in the market.