The Westview Mall rents space to clothing stores and charges shoppers an entry fee to get into the mall. All clothing stores are identical and all shoppers are identical. Answer the following questions, using a graph that shows the supply and demand for clothing:
If the mall rents space to several competitive clothing stores, how much can it collect in rent? How much can it collect in entry fees? How much can it collect altogether?
If the mall rents space to a single monopoly clothing store, how much can it collect in rent? How much can it collect in entry fees? How much can it collect altogether?
Would you advise the Mall owner to rent to several competitive stores or to one monopoly? Why?
Copy centers usually give substantial discounts to customers with large orders. Do you think they are price discriminating? Why or why not?
True or False: Because a monopolist is able to charge a higher price than a perfectly competitive firm, his marginal revenue is higher than what a perfectly competitive firm’s would be.
The RH Snippet company has one president and 1000 assembly line workers. Which of the following events would have a bigger impact on the price of Snippets and why?
a) The president gets a raise of $1,000,000 a year.
b) A new union contract raises each worker’s wages by $1,000 a year, but allows the firm to fire as many workers as it wants to.
Sample Solution
