2. The following table represents some information on a monopoly: Quantity (Q) 0 1 2 3 4 5 6 7 Price (P) 20 19 16 14 12 10 8 6 Revenue (R) Marginal Total Marginal Cost Revenue Cost (MR) (MC) (TC) 10 13 18 25 34 44 Profits 60 80 a. Fill in the missing values in the table and explain how each column is calculated b. What is the profit-maximizing output that the monopoly should produce? What are profits at this quantity? Explain your answers. c. How many units would be produced if this were a competitive market? What are profits? (Hint: the quantity will be where P = MC) Explain your work.

2. The following table represents some information on a monopoly: Quantity (Q) 0 1 2 3 4 5 6 7 Price (P) 20 19 16 14 12 10 8 6 Revenue (R) Marginal Total Marginal Cost Revenue Cost (MR) (MC) (TC) 10 13 18 25 34 44 Profits 60 80 a. Fill in the missing values in the table and explain how each column is calculated b. What is the profit-maximizing output that the monopoly should produce? What are profits at this quantity? Explain your answers. c. How many units would be produced if this were a competitive market? What are profits? (Hint: the quantity will be where P = MC) Explain your work.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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9. Regulating a natural monopoly Consider the only electric company in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for electricity services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. PRICE (Dollars per subscription) 8 288 VR 10 QUANTITY (Thousands of subscriptions) MR Complete the first row of the following table. Pricing Mechanism Profit Maximization 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 ATC MO D Short Run Quantity Price (Subscriptions) (Dollars per subscription) Profit Long-Run Decision
FIGURE 10.11 $100 10 Costs and revenues 82822 $100 Costs and revenues Refer to Figure 10.11 to answer this question. Suppose this graph depicts a monopoly industry. What will be the profit-maximizing price and output respectively? 10 Select one: OA. $40 and 15. B. $70 and 15. C. $60 and 20. D. $60 and 25. E. $40 and 30. FIGURE 10.11 RS23222 70 MR D-AR 10 15 20 25 30 35 40 45 50 55 Quantity per period 20 S-MC 10 S-MC MA D-AR 10 15 20 25 30 35 40 45 50 55 Quantity per period Select one: Refer to Figure 10.11 to answer this question. Suppose this graph depicts a perfectly competitive industry. What will be the equilibrium price and output respectively? A. $40 and 30. B. $60 and 20. C. $60 and 25. D. $40 and 15. E. $70 and 15.
8. Natural monopoly analysis The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 20 18 16 14 0 0 1 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 ATC MC 9 10 D Monopoly Outcome (? Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it.
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Refer to the following figure showing demand and marginal revenue for a monopoly. Demand and marginal revenue (dollars) 35 30 30 22 15 10 5 0 100 200 300 400 500 Output MR At any price above $ _ demand is elastic. $5 $10 $15 $20 zero
answer all parts
7. Natural monopoly analysis The following graph shows the demand (D) for electricity services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local electricity company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. 40 36 Monopoly Outcome 32 28 24 20 16 12 ATC MC MR 1 2 3 4 5 6 7 10 QUANTITY (Thousands of kilowatt-hours) PRICE (Cents per Kilowatt-hour)
Review the graph at right for a monopoly market (enter all of your responses as whole numbers). Price 100- How much is the consumer surplus? S 90- MC How much is the producer surplus? s 80- 70- How much is the deadweight loss? S 60 80- Monopoly total surplus is $ 50- Monopoly total surplus is V competitive total surplus. 40- 30- 20- 10- MR D 10 30 40 50 60 70 90 100 Quantity
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Mm.8. Subject:- economic
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