Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter9: Monopoly
Section: Chapter Questions
Problem 29CTQ: Imagine that you ale managing a small firm and thinking about entering the market of a monopolist....
Related questions
Question
please answer letter D only and provide clear and neat solution thank you
![E. Referring to the graph below of a natural monopoly:
100
90
80
70
60
55
50
40
30
20
10
Price
мс
MR
D
5 10 15 20 25 30 35 40 Quantity
Assume that MC = ATC
a. What price and quantity would be expected if the firm is allowed to operate completely
unregulated and why? What is the firm's total economic profit?
b. What is the deadweight loss of the firm? What is the source of the deadweight loss of a
monopolistic firm?
c. If a price ceiling of $40 is imposed by government regulators on the monopolist, estimate
the quantity that the monopolist will produce based on the graph. Would the price ceiling
on the monopolist improve economic efficiency or not? Explain briefly.
d. If this market is a regular monopoly instead of a natural monopoly, what change (s) would
likely be made on the graph to depict a regular monopoly?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F25e57d4c-d239-4cf3-a375-c7e28200869b%2Fc6db8dd0-18df-4159-b342-09060bf31a77%2Favmo3u_processed.png&w=3840&q=75)
Transcribed Image Text:E. Referring to the graph below of a natural monopoly:
100
90
80
70
60
55
50
40
30
20
10
Price
мс
MR
D
5 10 15 20 25 30 35 40 Quantity
Assume that MC = ATC
a. What price and quantity would be expected if the firm is allowed to operate completely
unregulated and why? What is the firm's total economic profit?
b. What is the deadweight loss of the firm? What is the source of the deadweight loss of a
monopolistic firm?
c. If a price ceiling of $40 is imposed by government regulators on the monopolist, estimate
the quantity that the monopolist will produce based on the graph. Would the price ceiling
on the monopolist improve economic efficiency or not? Explain briefly.
d. If this market is a regular monopoly instead of a natural monopoly, what change (s) would
likely be made on the graph to depict a regular monopoly?
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