Explain what we mean is when we say that the existence of monopoly prevents

If you had to argue that the diamond business in South Africa was a natural monopoly what reaso Show more (2) If you had to argue that the diamond business in South Africa was a natural monopoly what reasons would you give? Why would you think that the South African government is keen on keeping the diamond monopoly intact? (3) Explain why it is that high-powered regulation encourages cost cutting by the regulated firms while low-powered regulation does not. What is meant by high and low-powered regulation of monopolies or dominant firms? (4) What is regulatory capture? What is Rent-seeking? Why do you think that regulatory capture is so prevalent in representative democracies where market power exists among large firms? (5) Explain what we mean is when we say that the existence of monopoly prevents: inefficient use of resources (factors of production K and L) and loss of consumer welfare. What about dynamic efficiency? Would a monopoly or dominant firm always prevent dynamic efficiency? (6) Lets say a firm is a monopolist. Now this firm spends more on advertising to increase the demand for its product. Show on a graph with a horizontal AC curve what happens before and after the new expenditure on advertising. Show what has to happen in the graph to make sure that the firm maximizes its profits after the ad expenditure. (7) Would you classify a great popular artist like Michael Jackson as a monopolist with respect to what he produces? If so would that be an adequate explanation of why Mr. Jackson was able to price his products way above his MC curve. How do you think Michael Jackson was able to achieve dominance in his field of music expression? Would you say that Michael Jacksons product was perceived as unique? What type of demand curve do you think he faced from those who were his fans? Do you think that the elasticity rule played a part in his getting rich? (Remember problem (1) above.) Thinking in terms of your answer to (7) so far what would Michael Jackson and the Microsoft have in common? Nothing at all? Something? (8) Lets say that you want to make a lot of money as a rock star. In fact you believe that you have a special talent for a specific type of beat music? How would you use your time in order to become a personal monopoly with respect to your type of music? (Remember the earlier graph that stressed the three factors that will determine how much a wage salary or payment you can commend from providing your product. Now lets say you are successful in your rock star adventure. Do you think it is likely that your agents will ensure that concert ticket prices are above marginal cost? Would you be taking advantage of the elasticity rule in your line of work? Graph a hypothetical demand and supply (horizontal MC curve) relation for your music business and show just how the elasticity rule relationship might work out. (9) Often you find discount coupons for groceries in the newspaper. People can choose to cut out these coupons and take them to the market for the discount on specific products. If this is PD (Price Discrimination) what Degree of PD is it and what is the logic behind the coupon strategy? Do you think that the company offering the discount coupons has the people who do not use the coupons in mind with this strategy? What strategy might the store or the producer use when it prices its products for those who do not choose to use the coupons? (10) Assume that in the market for branded cigarettes from one producer there are distinct customer groups whose intensity of demand differs between the groups. That is there are different demand elasticities for different types of cigarettes produced by this one company. (Low filter high filer no filers long short sweet sours etc.) However the company charges one single price for any given package of cigarettes. Is this PD? If so what kind is it? (11) Assume that in the market for branded cigarettes from one producer there are distinct customer groups whose intensity of demand differs between the groups. That is there are different demand elasticities for different types of cigarettes produced by this one company. (Low filter high filer no filers long short sweet sours etc.) The company charges many different prices for any given package of cigarettes. Is this PD? If so what kind is it? If this is PD what strategic rule of pricing should the cigarette company use? Show less

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