8) Suppose the government imposes a tax of $20 million per month on cableproducers. Given that Concast makes optimal output and pricing choices, howmuch profit per month will it make?olololo$10 million$5 million$105 million$75 million Comcast has a cable monopoly. The following graph shows the demand, MR, andMC curve of Comcast. Use the graph to answer questions 3 to 8.Price (P) and Costs (indollars per subscription)$25$22$21$20$19056.5MC7MRATCQ (Number of subscriptionsin millions per month)

A monopoly refers to a firm that is the only seller in a market with no close competition. Since a…

8) Suppose the government imposes a tax of $20 million per month on cable producers. Given that Concast makes optimal output and pricing choices, how much profit per month will it make? OO $10 million $5 million $105 million $75 million

8) Suppose the government imposes a tax of $20 million per month on cable producers. Given that Concast makes optimal output and pricing choices, how much profit per month will it make? OO $10 million $5 million $105 million $75 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Joe is evaluating the marketing strategy at his restaurant and inn. Suppose that in response to a 'half off" sales promotion for Spaghetti dinners, Joe finds that nightly dinner sales increase from 30 per night to 70. Normally, the dinners sell for $8.00. a. What is the arc price elasticity of demand? ЕОР b. Would Joe increase revenues by further reducing the price? What about profits? Explain. Price reduction prompts revenue increase Price reduction prompts profit increase Explanation: Y/N/Can't tell Y/N/Can't tell
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3. It is frequently asserted that taxes on cigarettes and beer are regressive, because poor individuals spend a larger fraction of their income on such items than do better-off individuals. How would your estimate of the degree of regressivity be affected if you thought these commodities were produced by: a. Competitive industries with inelastic supply schedules? b. Monopoly with a linear demand schedule? c. Monopoly facing a constant elasticity demand schedule?
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2. The market for EpiPens Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power. On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will automatically extend to both axes. PRICE (Dollars per EpiPen) 1000 900 800 700 600 500 400 300 200 100 0 0 +…
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PRICE (Cents per Kilowatt-hour) 5 MR 2 QUANTITY (Thousands of kilowatt-hours) ATC MC 10 O True Which of the following statements are true about this natural monopoly? Check all that apply. O False D The electricity company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. Monopoly Outcome In order for a monopoly to exist in this case, the government must have intervened and created it. The electricity company is experiencing economies of scale. ? True or False: Without government regulation, natural monopolies can earn positive profit in the long run.
2. Consider the industry in question 1. Suppose a per-unit tax of $3 is added to every good that is sold. What is the new equilibrium quantity under this tax? Can you determine the price per unit that consumers will pay for this good and the price per unit that suppliers will receive once the tax is paid?
Refer to Table 1. Over which range of output is average revenue equal to price? Table 1 OO Quantity Price $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 2 3 4 5 6 7 9 1 to 5 units 3 to 7 units 5 to 9 units 1 Average revenue is equal to price over the entire range of output.