100908PRICE(Dollars per subscription)8708 8402010002MR46 8 10 12 14QUANTITY (Thousands of subscriptions)Complete the first row of the following table.Pricing MechanismProfit MaximizationMarginal-Cost PricingAverage-Cost PricingSuppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits.16ATCO TrueO False18 20Complete the third row of the previous table.DShort RunPriceQuantity(Subscriptions) (Dollars per subscription)ProfitSuppose now that the government decides to require the monopolist to set its price equal to marginal cost.Long-Run DecisionComplete the second row of the previous table.Suppose now that the government decides to require the monopolist to set its price equal to average total cost.True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

Monopoly is a type of market structure that consists of only one single firm in the entire market or…

100 80 PRICE (Dollars per subscription) 8 8 8 8 8 70 10 0 02 4 6 10 12 14 16 QUANTITY (Thousands of subscriptions) Complete the first row of the following table. Pricing Mechanism Profit Maximization MR Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Marginal-Cost Pricing Average-Cost Pricing 18 20 True D Complete the third row of the previous table. False Short Run Price Quantity (Subscriptions) (Dollars per subscription) Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Profit Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to average total cost. Long-Run Decision True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

100 80 PRICE (Dollars per subscription) 8 8 8 8 8 70 10 0 02 4 6 10 12 14 16 QUANTITY (Thousands of subscriptions) Complete the first row of the following table. Pricing Mechanism Profit Maximization MR Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Marginal-Cost Pricing Average-Cost Pricing 18 20 True D Complete the third row of the previous table. False Short Run Price Quantity (Subscriptions) (Dollars per subscription) Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Profit Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to average total cost. Long-Run Decision True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Monopoly, Practice Question Firm P is a monopolist for a new drug that makes people feel thinner. the total cost function is C(Q) = 200 + 10Q + Q² The inverse demand function is p(Q) = 82 - Q (a) By how much do revenues increase if this firm sells one more (small) unit of output? By how much does its cost go up if it produces one more (small) unit of output? (b) What is the optimal price and quantity the monopolist should charge and sell? (c) What is the profit the monopolist makes? Should the firm shut down in the short or long run? (d) If the company increases its price by a small fraction (let us say 1%), by what proportion does demand go down? [Round to two decimal places.] (e) What percentage of the price is due to costs and what is due to markup? [Round to two decimal places.] (f) What is the deadweight loss of the monopoly pricing compared to competitive prices?