e first row of the following table. echanism timization Short Run Quantity Price (Subscriptions) (Dollars per subscription) Cost Pricing Cost Pricing t the government forces the monopolist to set the price equal to marginal cost. e second row of the previous table. Profit t the government forces the monopolist to set the price equal to average total cost. e third row of the previous table. Long-Run Decision
e first row of the following table. echanism timization Short Run Quantity Price (Subscriptions) (Dollars per subscription) Cost Pricing Cost Pricing t the government forces the monopolist to set the price equal to marginal cost. e second row of the previous table. Profit t the government forces the monopolist to set the price equal to average total cost. e third row of the previous table. Long-Run Decision
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
6
![Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
Complete the first row of the following table.
Pricing Mechanism
Profit Maximization
Marginal-Cost Pricing
Average-Cost Pricing
Short Run
Quantity
Price
(Subscriptions) (Dollars per subscription)
Suppose that the government forces the monopolist to set the price equal to marginal cost.
Profit
Complete the second row of the previous table.
Suppose that the government forces the monopolist to set the price equal to average total cost.
Complete the third row of the previous table.
Work to decrease its costs
O Allow its costs to increase
Long-Run Decision
Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs
decrease. Over time, under the average-cost pricing policy, what will the local cable company most likely do?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff07a19be-a9c4-453c-bfd9-8aaec2b61c07%2F6a2fe431-bda1-4453-aad9-e2f1ec88c9ad%2Fa0mt8id_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
Complete the first row of the following table.
Pricing Mechanism
Profit Maximization
Marginal-Cost Pricing
Average-Cost Pricing
Short Run
Quantity
Price
(Subscriptions) (Dollars per subscription)
Suppose that the government forces the monopolist to set the price equal to marginal cost.
Profit
Complete the second row of the previous table.
Suppose that the government forces the monopolist to set the price equal to average total cost.
Complete the third row of the previous table.
Work to decrease its costs
O Allow its costs to increase
Long-Run Decision
Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs
decrease. Over time, under the average-cost pricing policy, what will the local cable company most likely do?
![9. 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.
PRICE (Dollars per subscription)
100
90
80
2
40
8
10
0
0
2
33
☆
MR
4 6 8 10 12 14
QUANTITY (Thousands of subscriptions)
16
D
18 20](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff07a19be-a9c4-453c-bfd9-8aaec2b61c07%2F6a2fe431-bda1-4453-aad9-e2f1ec88c9ad%2Fs7oamyc_processed.png&w=3840&q=75)
Transcribed Image Text:9. 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.
PRICE (Dollars per subscription)
100
90
80
2
40
8
10
0
0
2
33
☆
MR
4 6 8 10 12 14
QUANTITY (Thousands of subscriptions)
16
D
18 20
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