Boeing’s Starliner Is Close to Breaking SpaceX’s Astronaut Monopoly

EconEye Admin

4 years ago

When Boeing’s Starliner is available, NASA will be able to make more trips to the International Space Station. Most importantly, the Starliner will break SpaceX’s monopoly on flying astronauts for western countries and companies. Currently, SpaceX has serious pricing power.—qz.com

Answer the following questions to check your understanding of the story.

How does SpaceX determine the quantity of rides to provide and the price to charge?

SpaceX _______________.

a) provides the quantity of rides that minimize average total cost, and charges a price that equals marginal revenue

b) provides the quantity of rides that its customers require, and charges the highest price its customers are willing to pay

c) provides the quantity of rides at which marginal cost equals marginal revenue, and charges a price that equals marginal revenue

d) provides the quantity of rides at which marginal cost equals marginal revenue, and charges the highest price that its customers are willing to pay

SpaceX has a monopoly on transporting astronauts. How does SpaceX determine the quantity of rides to provide and the price to charge so that it maximizes economic profit?

SpaceX has a monopoly on transporting astronauts. It provides the quantity of rides at which marginal cost equals marginal revenue and charges the highest price that its customers are willing to pay.

Now suppose that Boeing’s Starliner enters the market and that SpaceX and Boeing form a cartel and agree to maximize joint profits. How does compliance with the cartel agreement determine the price?

If _______________ cheats on the cartel agreement, then the price will _______________.

a) one firm; lie between the price in a perfectly competitive market and the price charged by a monopoly

b) neither firm; lie between the price in a perfectly competitive market and the price charged by a monopoly

c) both firms; be the price charged by a monopoly

d) one firm; be the price charged in a perfectly competitive market

What is the price of a ride if Boeing and SpaceX keep to their cartel agreement? When does the price fall below the monopoly price?

If one firm cheats on the cartel agreement, the quantity of rides bought and sold increases and the price falls below the price charged by a monopoly. But the cheater doesn’t benefit if the price falls as low as the price charged in a perfectly competitive market, so the price lies between the price in a perfectly competitive market and the price charged by a monopoly.

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