Question.2939 - In the well-known case of United States vs. Microsoft, the US Department of Justice alleged that Microsoft abused "monopoly power" when it bundled its Internet Explorer Browser with its Windows Operating System. Based on your Internet research, write an analysis of 750 words on the merits of the DOJ's antitrust case against Microsoft and the company's defense. Delineate which market participants you believe benefited from the final court decision and whose interests were harmed.In figure 27.2 ( a ) How much profit does an unregulated monopolist earn? ( b ) How much profit would be earned if MC pricing were imposed? 2. Do total profits (A) decrease, (B) increase, or (C) stay the same when new technology reduces average total costs (shifts ATC downward in Figure 27.2) in ( a ) An unregulated natural monopoly? ( b ) A price-regulated natural monopoly? ( c ) A profit-regulated natural monopoly? 3. Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demand for the product is as follows: Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 Quantity demanded (units per day) 0 2 4 6 8 10 12 14 16 18 Under these conditions, ( a ) What price and quantity will prevail if the monopolist isn’t regulated? ( a1 ) Price ( a2 ) Quantity ( b ) What price–output combination would exist with efficient pricing (MC 5 p )? ( b1 ) Price ( b2 ) Quantity ( c ) What price–output combination would exist with profit regulation ( c1 ) Price (zero economic profits)? ( c2 ) Quantity Illustrate your answers on the following graph: FIGURE 27.2 Natural Monopoly: Price Regulation If unregulated, a natural monopoly will produce qA and charge pA , as determined by the intersection of the marginal cost and marginal revenue curves (point A). Regulation designed to achieve efficient prices will seek point B, where p 5 MC. Still lower average costs (production efficiency) are attainable at higher rates of output (capacity), however. On the other hand, a zero-profit, zero-subsidy outcome exists only at point C. Which price–output combination should be sought? I will email the figure separate.
Answer Below:
Part xxx U x Department xx Justice xx Microsoft xx May xxxxxxxxx Corporation xxxxx antitrust xxxxxxxx by xxx U x Department xx Justice xxx engaging xx anti-competitive xxxxxxxxx practices xxx U x DOJ xxxxxxx Microsoft xxxxxxxxxxx for xxxxxxxx its xxxxxxxx Explorer xx with xxx Window xxxxxxxxx system xx an xxxxxxx to xxxxxx the xxxxxxxxxxx in xxx browser xxxxxx and xxxxxxxxxx achieve x monopoly xxxxxxxx The xxxxxxxxx which xxxxx highlight xxx merits xx the xxx s xxxxxxxxx case xxxxxxx the xxxxxxxxx revolve xxxxxx the xxxxxxx of xxxxxxxxxxx efficiency xxxxxxxx choice xxx innovation xxxxxxxxx was xxxxxx under xxx Sherman xxxxxxxxx Act xx the xxxxxxxxxx that xx has xxxxxxxxxxx itself xx a xxxxxxxx in xxx operating xxxxxxx segment xxx Personal xxxxxxxxx and xxx formation xx such x market xxxxxxxxx is xxxxxxxxxx on xxx grounds xx economic xxxxxxxxxx and xxxxxx welfare xxxxxxx it xxx perceived xxxx the xxxxxxxxx strategy xxxxxxx by xxxxxxxxx - xxxxxxxxxxx the xxxxxxxx Explorer xx with xxx Window xxxxxxxxx system x will xxxx to xxx concentration xx market xxxxx in xxx hands xx the xxxxxxx undermining xxx bargaining xxxxx of xxx other xxxxxxxxxxx which xxx the xxxxxxxxx to xxxx a xxxxxxxxxxxx competition xx Microsoft xxxxxxxxx tied xxx browser xx to xxx Windows xxxxxxxxx System xxxx of xxxx thereby xxxxxxxx a xxxxxxxxx pricing xxxxxx making xx impossible xxx the xxxxxxxxxxx most xxxxxxxxxxx Netscape xx offer xxxxxxxxx products xx the xxxxxx Through xxxx marketing xxxxxxx the xxxxxxx tried xx create xx entry xxxxxxx to xxxxxx the xxxxx firms xxxx competing xxxxx creation xx new xxxxxxxx entails xxxx investment xxx hence xxxx as xxxxxxxxxx costs xx the xxxxx players xx was xxxx alleged xxxx Microsoft xxxxxxx into xxxxxxxxxxxx agreements xxxx computer xxxxxxxxxxxx and xxxxxxxx Service xxxxxxxxx in xxxxx to xxxxx the xxxxx for xxxxxxxx of xxxxxx its xxxxxxx available xx consumers xx was xxxxxxx that xxxx a xxxxxxxx by xxxxxxxxx was xxxxxx by xxx desire xxxxxxx to xxxxxxx the xxxxxxx market xxxxx in xxx computer xxxxxxxx segment xxx hence xxxxxxxxx its xxxxxxxx in xxx industry xxx U x DOJ xxxx Microsoft xx the xxxxxxx of xxxxxxxxx the xxxxxxx the xxxxxxx Antitrust xxx which xxxxxxxxx creation xx monopolies xxx cartels xx order xx serve xxx interests xx the xxxxxxxxx A xxxxxxxx power xx considered xx be xxxxxxxxxxxxx inefficient xxxxx it xxxxx the xxxxxxxxxx to xxxxxxxx price xxxxxxx which xxxxx him xxxxxx a xxxxx significantly xx excess xx competitive xxxxxx thereby xxxxxxxxxx the xxxxxxxxx Monopoly xxxxxxx innovation xxx limits xxx choices xxxxxxxxx to xxxxxxxxx this xxxxxxx because xxxxx is xxxxxx incentive xxx the xxxxx firms xx fairly xxxxxxx against x giant xxxxxxxxxxx with x dominating xxxxxx share xxxxxxxxx s xxxxxxx against xxx case xxxxxxxxx in xxx defense xxxxxxx that xx faced xxxxxxxxxxx threat xxxx other xxxxx companies xx the xxxxxxxxx Systems xxxxxx and xxx not xxxx a xxxxxxxx in xxx industry xxxxxxxxx argued xxxx integrating xxx IE xxxxxxx with xxx Windows xxxxxxxxx system xxx a xxxx to xxxxxxxx with xxx rivals xxx cannot xx classified xx anti-competitive xxxxxxxxx was xxxxxxx allowed xx create xxx add xxx features xxxxxxxxxxxxx to xxx IE xxxxxxx and xxxxxxxx that xxx IE xxxxxxxxxxxxx provided xxxx utility xx the xxxxxxxxx by xxxxxx its xxxxxxxxx system x value xxx money xxxxxx On xxx similar xxxxx Microsoft xxxx argued xxxx this xxxxxx feature xxx a xxxxxxxxxx of xxx innovation xxxxxxx which xxxxxxxx a xxxxx deal xx investment xx terms xx capital xxxxx resource xxx human xxxxxxxxx and xxxxx proves xxx company x efforts xx foster xxxxxxxxxx The xxxxxx to xxxxxxx the xx browserwith xxx Windows xxxxxxxxx system xxx to xxxxx the xxxxxxxxx in xxx market xxxxx and xxxxxxxxx convenience xxxxxxxxxx to xxx consumers xxxx a xxxxxxxxxxxxx browser xxxxxxxxx also xxxxxx the xxxxxxxxxxx pertaining xx the xxxxxxxxxxxx agreements xxxx the xxxxx computer xxxxxxxxxxxx and xxxxxxxx Service xxxxxxxxx It xxxxxxx that xxx contracts xxxx not xxxxxx restrictive xxxxxxxx vs xxxxx - xxxxxx the xxxxxxxx of xxx antitrust xxxxxxxxxx on xxxxxxxxx is xxxxx debated xx my xxxx it xxxxxx out xxxx the xxxxx court xxxxxxxxx offered x win-win xxxxxxxxx for xxx the xxxxxx participants xxx decisions xxxxx way xxx enhanced xxxxxxxxxxx in xxx software xxxxxxxx indicated xx the xxxxx of xxx web xxxxxxxx like xxxxxx Chrome xxxxxxx etc xx the xxxxxx Many xxx companies xxxxxxx the xxxxxxxx industry xxxxx after xxx verdict xxxxxxx a xxxxxxxxxx business xxxxxxxxxxx and xxxx helped xxx industry xxxxxxxx in xxx past xxxxxx This xxxx consumers x wide xxxxx of xxxxxxxxxxx to xxxxxx from xx per xxxxx tastes xxx preferences xxx costs xxxx come xxxx dramatically xxxxxxx on xxx benefits xx a xxxxxx segment xxx industry xxx only xxx entry xx new xxxxxx but xx the xxxx time xx influx xx sophisticated xxx suave xxxxxxxxxxxx gizmos xxx tablets xxxxxxxxxx has xxxxxx a xxxxxx weapon xxx competition xx this xxxx pong xxxxxxx among xxx industry xxxxxxx like xxxxxxxxx Google xxxxx IBM xxx for xxxxxxxxx a xxxxxx market xxxxx In xxxxxxxxxx the x S xxxxxxxxxx of xxxxxxx vs xxxxxxxxx case xxx been xxx of xx epic xx today x modern xxxxx of xxxxxxxxxxx where xxxxxxxxxxxxxxxx pursuits xxx engaged xxxxxxx strategic xxxxxxxx making xxxxxx than xxxxxxxxxxxx means xxx compels xxx proponents xx antitrust xxxx to xxxxx the xxxxxxxxx threats xx competitiveness xxxxxxx a xxxxxxxxx lens xx strategic xxxxxxxx References xxx Justice xxxxxxxxxx Was xxxxxxxxxx Right xx Go xxxxx Microsoft xx the x By xxxxxxx Yglesias xxxxxxxxx on xxxxxx Accessed xx http xxx slate xxx blogs xxxxxxxx microsoft xxxxxxxxx suit xxx vindication xx the xxxxxxx department xxxx Long xxxxxxxxx saga xxxx for xxxxxxxxx By xxxxxx Pian xxxx Published xx The xxxxxxx Times xx May xxxxxxxx at xxxx seattletimes xxx html xxxxxxxxx microsoft xxxx U x VS xxxxxxxxx The xxxxxxxx U x Judge xxxx Microsoft xxxxxxxx antitrust xxxx with xxxxxxxxx behavior xx Joel xxxxxxxx Published xx The xxx York xxxxx on xxxxx Accessed xx http xxx nytimes xxx business xxxxxxxxxxxxxxxxxxxxxxxxxxxx judge-says-microsoft-violated-antitrust-laws-with xxxx pagewanted xxx amp xxx pm xxxx if xxxxxxxxx loses xxx antitrust xxxx - xxxxxxx Department xxxxxxx considers xxxxxxxxx remedies xx Bob xxxxx Published xx Story xxxx CNN xxx on xxxxxxxx Accessed xx http xxxxxxx cnn xxx TECH xxxxxxxxx whatif xxx A xxxx of xxxxx in xxxxx The xxxxxxxxx Antitrust xxxxxxx Published xx Microsoft xxx Centre xxxxxx on xxx Accessed xx http xxx microsoft xxx en-us xxxx features x trialdoc xxxx The xxxxxxxxx Antitrust xxxx By xxxxxxxx Economides xxxxxxx April xxxxxxxx at xxxx archive xxx edu xxxxxxxxx - xxxxxxx In xxxxxx a xxx much xxxxxx does xx unregulated xxxxxxxxxx earn xxxxxx An xxxxxxxxxxx monopolist xxxx maximize xxx profit xx a xxxxx where xxxxxxxx Revenue xx equals xxxxxxxx Cost xx PROFIT xxxxxxxxxxxx RULE xx the xxxxxx maximization xxxxx A xxx monopolist xxxx produce xx units xxx charge x price xx pA xxx unit xxx we xxxx that xxxxxx is xxx difference xxxxxxx the xxxxx revenue xxx total xxxx Here xxxxx revenue xxxxxx by xxx unregulated xxxxxxxxxx equals xxxxxxxx produced xxxxxxxxxx by xxxxx qA xx and xxxxx cost xx quantity xxxxxxxx multiplied xx cost xx pD xxxxxxxxx the xxxxxx earned xx an xxxxxxxxxxx monopolist xxxxxx PROFIT xx pA x qA xx An xxxxxxxxxxx monopolist xxxxxxxxx its xxxxxx level xx qA xxxxx which xx much xxxxx than xxx competitive xx able xx charge x price xx higher xxxx the xxxxxxx Cost xx and xxxxx able xx make xxxxxxxx profits x How xxxx profit xxxxx be xxxxxx if xx pricing xxxx imposed xxxxxx Given xxx MC xxxxxxx rule xxx monopolist xx forced xx charge x price xxxxx to xxx marginal xxxx efficient xxxxxx condition xxx social xxxxxxx which xx the xxxxx B xx the xxxxxx At xxxxx B xxx monopolist xxxx produce xx units xxx charge x price xxxxx to xxxxxxxx cost xx pB xx such x case xxx firm xx charging x price xxxxx is xxxxx than xxx average xxxx of xxxxxxxxxx and xxxxx the xxxxxxxxxx incurs xxxxxx Such xx imposition xxx act xx a xxxxxxxxxxxx for xxx producer xxx he xxx eventually xxxx the xxxxxxxx There xxxxx be xxx solutions xxx it xxxxxxxxx the xxxxxxx for xxx loss xxxxxxxx the xxxxxx best xxxxxxxxxxx where x AC xxxx a xxxxxxx alternative xxxx help xxx producer xxxx his xxxxx of xxxxxxxxxx and xxxxxx in xxx business xx total xxxxxxx A xxxxxxxx B xxxxxxxx or x stay xxx same xxxx new xxxxxxxxxx reduces xxxxxxx total xxxxx shifts xxx downward xx Figure xx a xx unregulated xxxxxxx monopoly xxxxxx B xxxxxxxx Reason xxx total xxxxxxx of xx unregulated xxxxxxxx will xxxxxxxx in xxxx of x technological xxxxxxxxxxx resulting xx lower xxxxx Since xxx monopolist xxx produce xxx same xxxxx of xxxxxx at x lower xxxx the xxxxxx difference xxxxxxx the xxxxx revenue xxx total xxxx increases xxxxxxx increasing xxx total xxxxxxx for xxx monopolist x A xxxxxxxxxxxxxxx natural xxxxxxxx Answer x Increase xxxxxx A xxxxx regulation xxxx mean xxxx the xxxxxxxxxx is xxxxxxxxx to xxx efficient xxxxxxx rule xxxxx he xxxxxx charge x price xxxxxxx than xxx marginal xxxx i x P xx In xxxx a xxxxxxxx even xxxxxx the xxxxx cost xxxx fallen xxx profits xxxxxx by xxx monopolist xx not xxxxxxxx This xxxxxxx because x reduction xx total xxxxx will xxxx lower xxxxxxxx costs xx well xxx this xxxxxxxxx in xxxxxxxx cost xxxx also xxxxxxxxx into xxxxx price xxxxxxx by xxx natural xxxxxxxxxx However xx argument xxx be xxxxxx that xx the xxxxxxxxx in xxx total xxxxx accrue xxxx to xxx fixed xxxxxxx then xxx marginal xxxx remains xxx same xxx the xxxxxxxxxx can xxx an xxxxxxxxx in xxx form xx increased xxxxxxx c x profit-regulated xxxxxxx monopoly xxxxxx C xxxx the xxxx Reason x profit xxxxxxxxx natural xxxxxxxx implies xxxx the xxxxx charged xx the xxxxxxxxxx will xx just xxxxxxxxxx to xxxxx its xxxxx of xxxxxxxxxx zero xxxxxxxx profits xxxx the xxxxx charged xx the xxxxxxxxxx will xx equal xx the xxxxxxx total xxxx ATC x Now x reduction xx the xxxxx costs xxxx mean xxxx the xxxxxxxxxx will xxxx have xx reduce xxx price xxxxxxx for xxx product xx the xxx effect xx the xxxxxxxxx in xxxxx is xxxxxxxxxx passed xx to xxx consumers xx the xxxx of xxxxx prices xxxxx the xxxxxxxxxxxxxxxx natural xxxxxxxx with xx change xx the xxxxxxx earned xx the xxxxxxxxxx Suppose x natural xxxxxxxxxx has xxxxx costs xx and x constant xxxxxxxx cost xx The xxxxxx for xxx product xx as xxxxxxx Illustrate xxxx answers xx the xxxxx Price xxx unit xxxxxxxx demanded xxxxx per xxx Answer xxxxx per xxxx Quantity xxxxxxx d xxxxx per xxx Total xxxxxxx Total xxxx Average xxxxxxx Marginal xxxxxxx Marginal xxxx Average xxxx - x - x - x - xxxxx these xxxxxxxxxx a xxxx price xxx quantity xxxx prevail xx the xxxxxxxxxx isn x regulated x Price x Quantity xxxxx the xxxxxxxxxxx monopoly xxxxxx the xxxxxxxxxx will xxxxxxxx his xxxxxxx at xxxxxxxx Revenue xx equals xxxxxxxx Cost xx PROFIT xxxxxxxxxxxx RULE xxx graph xxxxx illustrates xxx case xx a xxxxxxxxxx in xx unregulated xxxxx Quantity xxxxx per xxx Demand xxxxx Marginal xxxxxxxxxxxx Revenue xxxxx A xx MC xx unregulated xxxxxxxxxx will xxxxxx a xxxxx of xxx unit xxx will xxxxxxx units xxx day xx maximize xxx profits xxx point x in xxx figure xxxxx is xxx profit xxxxxxxxxx point xxx the xxxxxxxxxx where xxx Marginal xxxx equals xxx Marginal xxxxxxx b xxxx price xxxxxx combination xxxxx exist xxxx efficient xxxxxxx MC x b xxxxx b xxxxxxxx Under xxx efficient xxxxxxx rule xx P xxx price-output xxxxxxxxxxx has xxxx illustrated xx the xxxxxx below xxxxxxxx units xxx day xxxxxx Curve xxxxxxxx CostMarginal xxxxxxx Point x MC x The xxxxx charged xx the xxxxxxxx equals xxx Marginal xxxx MC x e xxx unit xxxxxxxxx pricing xxxx At x price xx per xxxx the xxxxxxxx will xxxxxxx a xxxxxxxx equal xx units xxx day x What xxxxx output xxxxxxxxxxx would xxxxx with xxxxxx regulation x Price xxxx economic xxxxxxx c xxxxxxxx Under xxxxxx regulation xxx monopolist xx entitled xx earn xxxx zero xxxxxxxx profits x e xxx price xx the xxxx is xxxx sufficient xx cover xxx total xxxx This xxxxxxxx has xxxx illustrated xx the xxxxxx below xxxxxxxx units xxx day xxxxxx CurveMarginal xxxxxxxxxxxx RevenueATCP xxxxxx monopolist xxxxx profit xxxxxxxxxx will xxxxxxx units xxx day xxx will xxxxxx a xxxxx of xxx unit xx that xx is xxxx to xxxxx his xxxxx of xxxxxxxxxx and xxxx zero xxxxxxxx profits xxxxx per xxxx Quantity xxxxxxxx Units xxx day xxxxx Revenue xxxxx Cost xxxxxxx Revenue xxxxxxxx Revenue xxxxxxxx Cost xxxxxxx Cost x - x - x - x Given xxxxx cost xxxxxxxx Marginal xxxx Formulae xxxxx Revenue xxxxx X xxxxxxxx Average xxxxxxx Total xxxxxxx Quantity xxxxxxxx Revenue xxxxx Revenue xxxxxxxx Total xxxx Fixed xxxx Variable xxxx Here xxx Variable xxxx MCQ x Average xxxx Total xxxx QuantityMore Articles From Economics
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