Question

1.- While insecurity causes losses for some, it generates profits for others. "From a couple of years to now, the search for us has skyrocketed. Before, it was us looking for clients, making them see the need to hire private, specialized and armed security," Fuentes said. Miguel Ángel Silva Gómez, Code Uno's chief operating officer, with 16 years in the market, indicated that, although there is more demand for these services, they have not been able to increase the price because there is also greater competition.
Assuming that the security market is one of perfect competition, the failure to increase the price implies that the marginal revenue (T / F) cannot be increased either.
Assuming that the security market was a monopoly, it is to be expected that:
i. The maximized level of welfare production is not generated (T / F)
ii. Prices are higher than marginal cost (T / F)
iii. The supply curve is the one that will limit the market power of the monopolist (T / F)

Answer 1

Assuming that the security market is one of perfect competition, the failure to increase the price implies that the marginal revenue (T / F) cannot be increased either: TRUE (since in perfectly competitive markets P = MR = MC, the inability to increase price implies marginal revenue can also not be increased)

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Assuming that the security market was a monopoly, it is to be expected that:

i. The maximized level of welfare production is not generated: TRUE (Monopolies work to maximize profits and not welfare)

ii. Prices are higher than marginal cost: TRUE (Monopolies charge prices at the point MR = MC in order to maximize profits. This takes place at the point P > MC)

iii. The supply curve is the one that will limit the market power of the monopolist: FALSE (A monopoly has no well defined supply curve, and its market powrt is limited by the demand curve it faces)