Discuss some policy options a government could have to intervene in such market and prevent the monopoly creation.

Assignment Questions:

Q1. You have been hired as an economic consultant by a price-taking (a perfectly competitive) firm that produces T-shirts. The firm already has a factory, so it is operating in the short-run. The price of T-shirt is $9, the hourly wage is $24, and each T-shirt requires $1 worth of material. The following table shows the relationship between the number of workers and output of T-shirts.

Workers	10	11	12	13	14	15
Output	5	29	41	47	50	52
Labor cost
Material cost
Fixed cost	$2	$2	$2	$2	$2	$2
Total cost
Marginal cost

 

Fill in the blanks in the table. (3 points)

What is the profit maximizing output? [ students may use marginal approach] (1 points)

Note: For answering question-1 (a) and (b) students are required to show all possible calculations.

Q2. See around you and pick up a firm which is either dominating the market or trying to create monopoly.

(a) Write in brief about the firm chosen and explain how the firm is trying to create a monopoly or dominating the market? (2 points)

(b) Elaborate your opinion, why we as a society should worry about a firm trying to create a monopoly? (2points)

(c) Discuss some policy options a government could have to intervene in such market and prevent the monopoly creation. (2points)