(D) total costs? (E) profit or loss? (F) Will the monopoly need a subsidy? (G) If so, how much? 3. If cost-of-service regulation (fair-return price or average cost pricing) is imposed on this monop- olist, what will be the level of (A) output?, (B) price? (C) total revenue? (D) total costs? (E) profit or loss? 4. What are the advantages and disadvantages of marginal cost pricing? 5. What are the advantages and disadvantages of cost-of-service regulation? Regulating Monopoly Suppose you are an analyst for a board that regulates local monopolies. Your supervisor has given you the three questions below. Using the information in Figure 37.1, answer your supervisor's questions. Figure 37.1 Regulating a Monopoly $5.00 w 4.00 MG 3.00 ATC 2.00 1.00 MR 1,000 2,000 3,000 4,000 5,000 QUANTITY 1. If this monopolist is not regulated, what will be the level of (A) output? (B) price?. (C) total revenue? (D) total costs? (E) profit or loss? 2. If this monopolist is regulated by marginal cost pricing (i.e., the socially optimal price), what will be the level of (A) output? (B) price? (C) total revenue? COSTS/REVENUE

(D) total costs? (E) profit or loss? (F) Will the monopoly need a subsidy? (G) If so, how much? 3. If cost-of-service regulation (fair-return price or average cost pricing) is imposed on this monop- olist, what will be the level of (A) output?, (B) price? (C) total revenue? (D) total costs? (E) profit or loss? 4. What are the advantages and disadvantages of marginal cost pricing? 5. What are the advantages and disadvantages of cost-of-service regulation? Regulating Monopoly Suppose you are an analyst for a board that regulates local monopolies. Your supervisor has given you the three questions below. Using the information in Figure 37.1, answer your supervisor's questions. Figure 37.1 Regulating a Monopoly $5.00 w 4.00 MG 3.00 ATC 2.00 1.00 MR 1,000 2,000 3,000 4,000 5,000 QUANTITY 1. If this monopolist is not regulated, what will be the level of (A) output? (B) price?. (C) total revenue? (D) total costs? (E) profit or loss? 2. If this monopolist is regulated by marginal cost pricing (i.e., the socially optimal price), what will be the level of (A) output? (B) price? (C) total revenue? COSTS/REVENUE

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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