(2022 Spring Final Q65-69) Suppose a railway monopolist faces a demand curve and total cost curve below: Demand: P = 144 -0.50 dollars per unit each year Total cost: TC = 3920 + 4Q dollars each year where Q is number of railway services per year, and marginal cost of the railway monopolist is fixed at 4 dollars per unit of railway service. dollars per unit of railway service and provides (a) To maximize profit, the monopolist charges units of railway service per year. (b) Continue with the previous question. The deadweight loss in this market is dollars per year. (c) Suppose the government forces the monopoly to charge at its marginal cost. The monopolist will not exit the industry if the government provides a lump-sum payment support amounting to at least dollars per year. (d) Suppose, instead, the government does not want to provide any lump-sum payment to the monopoly, the lowest price ceiling that the government can impose on the monopoly so that it will not exit the industry is dollars per unit of railway service. (e) Suppose, instead of the two price control policies above, the government provides a per-unit subsidy of 28 dollars to railway consumers, the deadweight loss in this market will be dollars per year.

(2022 Spring Final Q65-69) Suppose a railway monopolist faces a demand curve and total cost curve below: Demand: P = 144 -0.50 dollars per unit each year Total cost: TC = 3920 + 4Q dollars each year where Q is number of railway services per year, and marginal cost of the railway monopolist is fixed at 4 dollars per unit of railway service. dollars per unit of railway service and provides (a) To maximize profit, the monopolist charges units of railway service per year. (b) Continue with the previous question. The deadweight loss in this market is dollars per year. (c) Suppose the government forces the monopoly to charge at its marginal cost. The monopolist will not exit the industry if the government provides a lump-sum payment support amounting to at least dollars per year. (d) Suppose, instead, the government does not want to provide any lump-sum payment to the monopoly, the lowest price ceiling that the government can impose on the monopoly so that it will not exit the industry is dollars per unit of railway service. (e) Suppose, instead of the two price control policies above, the government provides a per-unit subsidy of 28 dollars to railway consumers, the deadweight loss in this market will be dollars per year.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 6E

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