The wine industry is currently composed of many firms, and wine is sold in a perfectly competitive market.The wine industry produces the efficient annual output of wine, which is 100,000 bottles per year.The market equilibrium price is $5 per bottle.
a.Draw the market demand and supply of wine and label the curves to show why the market out?put is the efficient output.
b.Suppose that the wine industry is consolidated into one large monopoly firm.As a result of the monopolization of the industry, the price of wine increases to $7 per bottle, and the annual quantity demanded falls to 75,000 bottles.Explain why this output is not efficient and show the loss in net benefits resulting from monopolization of the industry.

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The Answer of The wine industry is currently composed of many firms, and wine is sold in a perfectly competitive market.The wine industry produces the efficient annual output of wine, which is 100,000 bottles per year.The market equilibrium price is $5 per bottle.
a.Draw the market demand and supply of wine and label the curves to show why the market out?put is the efficient output.
b.Suppose that the wine industry is consolidated into one large monopoly firm.As a result of the monopolization of the industry, the price of wine increases to $7 per bottle, and the annual quantity demanded falls to 75,000 bottles.Explain why this output is not efficient and show the loss in net benefits resulting from monopolization of the industry.

The Wine Industry Is Currently Composed of Many Firms, and Wine