(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 3864+ 50 dollars each year where Qis number of railway services per year, and marginal cost of the railway monopolist is fixed at 5 dollars per unit of railway service. (a) To maximize profit, the monopolist charges 74.5 dollars per unit of railway service and provides 139 units of railway service per year. (b) Continue with the previous question. The deadweight loss in this market is 4830. 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 4830. dollars per year. X (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 5 dollars per unit of railway service. X (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 6972. 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 3864+ 50 dollars each year where Qis number of railway services per year, and marginal cost of the railway monopolist is fixed at 5 dollars per unit of railway service. (a) To maximize profit, the monopolist charges 74.5 dollars per unit of railway service and provides 139 units of railway service per year. (b) Continue with the previous question. The deadweight loss in this market is 4830. 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 4830. dollars per year. X (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 5 dollars per unit of railway service. X (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 6972. dollars per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:(2022 Spring Final Q65-69) Suppose a railway monopolist faces a demand curve and total cost curve below:
where Q is number of railway services per year, and marginal cost of the railway monopolist is fixed at 5 dollars per unit of railway service.
units of railway service per year.
(a) To maximize profit, the monopolist charges 74.5 dollars per unit of railway service and provides 139
✓
Demand: P = 144 -0.50 dollars per unit each year
Total cost: TC = 3864 +50 dollars each year
(b) Continue with the previous question. The deadweight loss in this market is 4830. 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 4830. dollars per year.
X
(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 5 dollars per unit of railway service.
X
(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
6972. dollars per year.
X
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