Goolsbee1e_Solutions_Manual_Ch09 - Market Power and Monopoly 9 1 People are always complaining about Facebook It changed the way its news feed works the

Goolsbee1e_Solutions_Manual_Ch09 - Market Power and...

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Solution Solution Solution 1. People are always complaining about Facebook: It changed the way its news feed works, the privacy settings are awful, there are too many game notifications, and so on. Recognizing dissatisfaction with Facebook, Google tried three times to enter the social networking market, first with Buzz, then with Wave, and now with Google Plus. Users say that the Google Plus platform is far superior to Facebook’s, yet Google Plus appears to be failing. Explain why consumers might reject a superior product for an inferior one in a market like this. 2. Sally sells seashells by the seashore. When Sally prices her shells at $7 each, she sells 5 shells every day. When she prices her shells at $6, she sells 6.a. What is Sally’s total revenue when she chooses to sell 5 shells (by pricing at $7)?b. What is Sally’s total revenue when she chooses to sell 6 shells (by pricing at $6)?c. What is the marginal revenue Sally receives from deciding to sell a 6th shell?d. The 6th shell sells for a price of $6. Why is the marginal revenue from selling a 6th shell so much lower than $6? 3. Indicate whether the following statements are true or false, and then explain your answers:a. The marginal revenue from selling another unit of eggs can never be higher than the price of eggs.b. Because the price a seller charges is always greater than $0, the marginal revenue from selling another unit must also be greater than $0.3. a. There are two effects that occur when a firm sells an additional unit of output. The first effect is the
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