AP Microeconomics
Assume that in the independent nation of Qari sugar production is controlled by a sugar monopoly, SugarCo, which earns economic profits. There are well over a million buyers of sugar in Qari but only one seller of sugar. Imports of sugar are forbidden.
a. In what type of market structure does SugarCo compete? List and briefly explain the characteristics of this market structure.
b. Draw a graph that shows the determination of the profit maximizing price and quantity of sugar in SugarCo.
· Label the profit maximizing price as "Ppm" and the quantity produced as "Qpm."
· Shade in the area of economic profits.
· Outline or shade in the deadweight loss.
c. Neighboring nation Nari now invades Qari and topples its government. SugarCo is destroyed and the sugar market is broken into hundreds of competing firms, all selling an identical product. In what type of market structure do these new firms now compete? List and briefly explain the characteristics of this new market type
Answers
Explanation:
sugar are forbidden.
a. In what type of market structure does SugarCo compete? List and briefly explain the characteristics of this market structure.
b. Draw a graph that shows the determination of the profit maximizing price and quantity of sugar in SugarCo.
· Label the profit maximizing price as "Ppm" and the quantity produced as "Qpm."
· Shade in the area of economic profits.
· Outline or shade in the deadweight loss.
c. Neighboring nation Nari now invades Qari and topples its government. SugarCo is destroyed and the sugar market is broken into hundreds of competing firms, all selling an identical product. In what type of market structure do these new firms now compete? List and briefly explain the characteristics of this new market type
Explanation:
· Label the profit maximizing price as "Ppm" and the quantity produced as "Qpm."
· Shade in the area of economic profits.
· Outline or shade in the deadweight loss.
c. Neighboring nation Nari now invades Qari and topples its government. SugarCo is destroyed and the sugar market is broken into hundreds of competing firms, all selling an identical product. In what type of market structure do these new firms now compete? List and briefly explain the characteristics of this new market type