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Apple has the largest market capitalization of any company in the world; its stock is worth over $750 billion, well ahead of Alphabet (Google), Microsoft and Amazon. Apple produces computers, phones, tablets, and other digital devices. It also provides services, including the App Store and iTunes. Apple holds 10 percent of the laptop market, 20 percent of the smartphone market, 60 percent of the tablet market, and 30 percent of the music streaming business.
a) A key part of Apple's success has been the iPhone. Apple is deciding what price to set for the iPhone XI when it comes out in 2018. The elasticity of demand for iPhone X turned out to be -2. Marginal cost is $550. What price does Apple charge? For full credit, show how you obtained your answer.
b) Some lawyers claim that Apple is a monopoly. What would you need to know to answer this question, based on what you have learned in this course?
c) Building upon your answer to part (b), do you think Apple is a monopoly? Explain why or why not?
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