20- SM What happens if a perfectly competitive industry becomes a monopoly? Suppose the demand curve in the figure is market demand and the corresponding market supply curve represents the marginal cost of production. Compared to perfect competition, a profit-maximizing monopoly would decrease output by 2 units. (Enter your response as an integer) In addition, a monopoly would lower price by $12 Price and cost perunt 18- 10- 14- 126 12- 10- 8- MR 10 12 14 10 Quantity 18

20- SM What happens if a perfectly competitive industry becomes a monopoly? Suppose the demand curve in the figure is market demand and the corresponding market supply curve represents the marginal cost of production. Compared to perfect competition, a profit-maximizing monopoly would decrease output by 2 units. (Enter your response as an integer) In addition, a monopoly would lower price by $12 Price and cost perunt 18- 10- 14- 126 12- 10- 8- MR 10 12 14 10 Quantity 18

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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SA 23 20 15 13 7 1200 1800 What is the monopolist's profit maximizing quantity? MR The graph shows the demand, marginal revenue, marginal cost and average total cost curves when there is a monopoly in the internet industry. Answer the following questions by entering only numbers found on the above graph. What price will the monopolist charge when it's producing its profit maximizing quantity? MC ATC How much profit does the monopolist earn when it's maximizing its profit? If the government were to regulate the monopolist by forcing the monopolist to set its P = MC, would the monopolist operate? (Enter either YES or NO)
Table 15-1 The following table provides information on the price, quantity, and average total cost for a monopoly. Average Total Cost (Dollars per unit) O a. $40 O b. $10 O c. $30 O d. $20 Price (Dollars per unit) 24 18 12 6 0 Refer to Table 15-1. What is the maximum profit that the monopolist can earn? Quantity (Units) 0 5 10 15 20 14.00 11.00 10.67 11.00
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Consider a natural monopoly with large fixed costs and a constant marginal cost of production, such as supplying water to household. Which condition can be used to regulate such a natural monopoly to ensure that the firm continues to operate while maximizing consumer surplus? Question 23Answer a. Demand = Average Cost b. Demand = Marginal Cost c. Marginal Cost = Marginal Revenue d. Price = Marginal Cost e. Price = Marginal Revenue
8. Can a monopolist that is not subject to any regulation lead the market to Pareto efficiency by his own initiative? Pareto efficiency is a situation that cannot be modified so as to make any one individual better off without making at least one individual worse off. In the model of monopoly, we assume that the ultimate goal of a monopolist is to maximize his profit, which means MC-MR. We have seen (for example, in the lecture or earlier problems, e.g., problem 5) that this equality leads the monopolist to produce less and charge a higher price than in perfect competition. This makes the monopolist better off but at the same time makes consumers worse off, as compared to perfect competition. This also leads to a deadweight loss. As we have the deadweight loss, the monopoly is definitely not Pareto efficient. See the lecture slide # 37. The transactions between Qm and Qk (quantities supplied in the monopoly and perfect competition, respectively) could take place to everyone's benefit,…
Suppose that the quantity of natural gas demanded in a city is 70 billion cubic meters when the price is $0.24 per cubic meter. The table below shows the total costs for a firm supplying natural gas to this market. Is the firm a natural monopoly? Quantity (billion m³) 20 30 40 50 60 70 Total cost ($ billion) 4.5 6. 9.0 12.0 15.5 19.5 No, because two or more firms could satisfy the entire market demand at a lower total cost than a single firm can. No, because two or more firms could satisfy the entire market demand at a lower average total cost than a single firm can. Yes, because a single firm can satisfy the entire market demand at a lower total cost than two or more firms could. Yes, because a single firm can satisfy the entire market demand at a lower average total cost than two or more firms could.
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
Refer to the following figure showing demand and marginal revenue for a monopoly. AS Demand and marginal revenue (dollars) 35 30 25 20 15 10 5 O At any price above $ $5 $10 $15 $20 100 zero 200 300 D 400 Output MR demand is elastic. 500
7. Regulating a natural monopoly Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. 100 90 80 70 60 ATC A MC 10 MR D 10 12 14 16 18 20 QUANTITY (Thousands of subscriptions) Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits without constraints. PRICE (Dollars per subscription
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