The year is 2350 and Captain Kirk is now in command of the USS Enterprise. As us
ID: 1164661 • Letter: T
Question
The year is 2350 and Captain Kirk is now in command of the USS Enterprise. As usual, the Chief Engineer (Mr. Scott) is warning that the dilithium crystals are running out; as we all know, these are important as they regulate the anti-matter properties of ship. In other words, no crystals, no space-time travel.
There is only one source of crystals in the universe (owned by the United Federation of Planets). Does this constitute conditions for the establishment of a monopoly? If so, why? If not, why not? If the crystals are owned by UFB, what price should it set (per ton)? How will it set the price versus marginal costs? How is profit maximization created? In this case, is (eventual) market failure a possibility, given the need for the crystals by all of the major spaceships traveling throughout the universe? Please support you position with course concepts. What happens if some consuming planets are willing to pay a higher price than others to secure crystals?
Explanation / Answer
Yes this is a situation where we can get the case of monopoly. Because the supply of crystal are owned by United Federation of planet. As it is the only source so from here we can get the establishment of monopoly.
If the crystals are owned by UFB then can set the price MR=MC per ton. It means for per unit ton marginal revenue is equal to marginal cost.
It can set the price equal to marginal cost if it be a natural monopoly. It means if it does use the monopoly power under natural monopoly. It does not wants to make monopoly profit.
Profit maximization can be created through MR= MC or P = MC. If the price are set MR= MC there will be more profit than P= MC. There will be profit or not that depends on position of average cost. If in eauiequilib P>AC then there will be profit and if price is less than average cost then there will be loss.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.