Answered: Question 9 True/False: Natural…

Question 9 True/False: Natural monopolies occur because they have a declining average cost curve over large outputs relative to the market demand, Group of answer choices True False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 9

True/False: Natural monopolies occur because they have a declining average cost curve over large outputs relative to the market demand,

Group of answer choices

True

False

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A natural gas company has a low average total cost due to its large scale production. The initial cost of setting up the infrastructure, such as pipes and hoses, makes it risky and, most likely, unprofitable for competitors to enter the market. Which barriers to entry appropriately explains why this monopoly exists? Group of answer choices Economies of Scale Legal Monopoly Control of a Physical Resource
true or false Natural monopolies are regulated by government agencies.
c) Under what circumstances is it possible and profitable for a monopolist to charge different prices for the same product?
Use the following to answer questions (1)-(6): Suppose a monopolist sells a product to consumers for which a particular consumer's choice is whether to buy 1 unit of the product or not to buy the product. In the absence of price discrimination, the market demand for the monopolist's product is: Q-150-%P. Further, the firm's short-run total cost is: TC-1000 + 100Q. Now, knowing each consumer's reservation price, imagine the monopolist wishes to engage in first-degree price discrimination. [1] A particular consumer's reservation price corresponds to the maximum amount they a willing to pay to buy 1 unit of the product. A. B. [2] Wishing to maximize profit from first-degree price discrimination, the monopolist should sell a quantity equal to: A. 50 B. 75 C. 100 D. None of the above [3] Continuing question (2), at the quantity chosen the consumer willing to pay the least for the product has a reservation price exceeding $50. A. B. [4] A. B. C. D. [5] True False A. B. C. D. [6] A. B. True…
Which statement best explains why a city water system has a natural monopoly structure? A water system may set prices at any level it wants to maximize profits and acts in its own interest. A water system requires so little innovation that there is little incentive for businesses to compete for the market. The cost for a competing water system to enter the market is so high that the return on investment is too low. The marginal cost to additional consumers is extremely high compared with average cost for the water system.
True/False with explanation: Monopolist will never operate in the inelastic portion of the demand curve (assuming that the monopolist is not facing a constant-elasticity demand curve)
Problem 19 A publishing company has a monopoly in the sales of football cards. According to its estimates, the company's inverse demand function is p = 0.4-0.01q. The company's marginal cost is constant at £0.08. Suppose that the company wants to sell football cards in albums only. Using such a block pricing approach, what will be optimal price that the firm needs to set to maximize its profits? a) £5.12 b) £7.68 c) £2.56 d) £15.36 e) £3.84
35. Consider a publicly owned nondiscriminating monopoly whose marginal cost is 10, whose average cost is 10 +90/Q, and whose demand curve is P = 100 –-Q, where P is price and Q is quantity. The government instructs the firm to produce a quantity such that MC = P. Which of the following statements is true? %3D (a) The firm makes a profit of 90 (b) The firm breaks even (c) The firm requires a subsidy of 90 (d) The firm makes a profit of 100 (e) The firm requires a subsidy of 100
Examine three (3) characteristics of firms that operate as a monopoly.
When regulators impose a marginal cost or average total cost pricing strategy to regulate a monopolist, which of the following will most likely NOT occur? Question 15 options: a) an economic loss b) an incentive to reduce cost c) a subsidy d) none of the above
The figure that is talked about in part B is also attached.
b) Sketch a diagram representing the typical demand, revenue and cost curves for a monopoly. Identify the point of profit maximising output and associated price. Finally, assuming the same marginal costs, show what would be the difference in price and output in the case of perfect competition.