2. Andrew is a monopolist whose production process exhibits economies of scalE (a) Draw a diagram illustrating Andrew's profit-maximizing price and quantity. Or your diagram, identify the deadweight loss of monopoly. (b) The government is concerned that Andrew is charging too high a price and plans to regulate the price. Htustrate the price regulation you would recommend on your diagram and explain your recommendation. (c) What is the maximum amount of money Andrew would be willing to spend lob- bying the government to avoid the price regulation you identified in (b)?

2. Andrew is a monopolist whose production process exhibits economies of scalE (a) Draw a diagram illustrating Andrew's profit-maximizing price and quantity. Or your diagram, identify the deadweight loss of monopoly. (b) The government is concerned that Andrew is charging too high a price and plans to regulate the price. Htustrate the price regulation you would recommend on your diagram and explain your recommendation. (c) What is the maximum amount of money Andrew would be willing to spend lob- bying the government to avoid the price regulation you identified in (b)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Monopoly Market MC - Marginal Cost MR - Marginal Revenue D - Demand ATC - Average Total Cost Refer to the figure above. If this monopolist is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's total revenue will be: $100 $160 $180 $120
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3. Using the cost curves for the monopolist (right), answer the questions 3a - 3d below: a. Indicate where the monopolist maximizes profits, output is equal to b. The monopoly price that maximizes profits is c. What is the maximum profit the firm can earn from its product? d. When the monopolist is maximizing total profit, the average total cost of producing that output level is? Price (dollars) 10 6 4 0 MR 6 Quantity T 11 ||| 8 9 10 MC ATC D
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(Figure: Demand, Revenue, and Cost Curves for Thnceds) Use Figure: Demand, Revenue, and Cost Curves for Thneeds. Thneeds and Things is a monopolist in the thneed ("things we need") market. To maximize profit, Thneeds and Things will sell thneeds and at a price of Price of thneeds $100 90 80 70 60 MC ATC 50 40 30 20 MR 10 20 60 100 140 180 220 Quantity of thneeds 70, $65 O b. 100; $50 O c. 120: $40 O d. 150: $46
4. The figure below presents the demand curve, marginal revenue, marginal costs, and average total costs facing a monopolist producer. Plot the profit-maximizing price and quantity on the graph. Under monopoly pricing, are profits positive, negative, or zero? Draw the deadweight loss under monopoly pricing. If government mandates P = ATC, are profits positive, negative, or zero? Compared to monopoly pricing, is deadweight loss smaller, larger, or the same size? If government mandates efficient pricing, are profits positive, negative, or zero? Compared to monopoly pricing, is deadweight loss under efficient pricing smaller, larger, or the same
2. To exploit their market power, monopolists choose to sell a quantity that is larger thanthat which would be produced if the market were competitive.(a) True. (b) False.
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4. A monopolist is faced with the following cost and revenue curves: $ 80 70 60 50 40 30 20 10 0 -10 0 -20 100 200 300 400 FMC 500 AC AR 600 MR Quantity (a) What is the maximum-profit output?. (b) What is the maximum-profit price? (c) What is the total revenue at this price and output? (d) What is the total cost at this price and output? (e) What is the level of profit at this price and output? (f) If the monopolist were ordered to produce 300 units, what would be the market price? (g) How much profit would now be made? (h) If the monopolist were faced with the same demand, but average costs were constant $60 per unit, what output would maximise profit? (i) What would be the price now? (j) How much profit would now be made? (k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of $40. How much will now be sold?.