ST12.2 Deadweight Loss from Monopoly. The Las Vegas Valley Water District(LVVWD) is a not-for-profit agency that began providing water to the Las Vegas Valley in 1954.The District helped build the city's water delivery system and now provides water to more than1 million people in Southern Nevada. District water rates are regulated by law and can cover onlythe costs of water delivery, maintenance, and facilities. District water rates are based on a four-tier system to encourage conservation. The first tier represents indoor usage for most residentialcustomers. Rate for remaining tiers becomes increasingly higher with the amount of water usage.To document the deadweight loss from monopoly problem, allow the monthly market suPplyand demand conditions for water in the Las Vegas Water District to beQs=10P(Market Supply)QD = 120 – 40P(Market Demand)where Q is water and P is the market price of water. Water is sold in units of 1000 gallons, so a $2price implies a user cost of 0.2¢ per gallon. Water demand and supply relations are expressed interms of millions of units.A. Graph and calculate the equilibrium price-output solution. How much consumer surplus,producer surplus, and social welfare is produced at this activity level?B. Use the graph to help you calculate the quantity demanded and quantity supplied if themarket is run by a profit-maximizing monopolist. (Note: If monopoly market demand isP= $3 – $0.025Q, then the monopolist's MR = $3 – $0.05Q.)C. Use the graph to help you determine the deadweight loss for consumers and the producer ifLVVWD is run as an unregulated profit-maximizing monopoly.D. Use the graph to help you ascertain the amount of consumer surplus transferred toproducers following a change from a competitive market to a monopoly market. How muchis the net gain in producer surplus?

Given, The demand and supply for a monopoly is given as : Qs=10PQd=120-40P where Q is the quantity…

Answered: ST12.2 Deadweight Loss from Monopoly.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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10 8 7 5678 Price = 10, Quantity = 5 Price = 3, Quantity = 5 MC Price = 8, Quantity = 7 Q If the monopolist depicted in the above figure is maximizing profits, the correct price/output combination will be: Price = 6, Quantity = 6 ATC D
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10
26 $55 $50 $45 I of $40 $35 $30 $25 $20 Demand = P $15 $10 $5 MR $0 40 80 120 160 200 240 Output (Q) The diagram above shows the Demand and Marginal Revenue curves for a monopolist. Which of the following general relationships is NOT demonstrated in the diagram? Select one: a. Price is greater than Marginal Revenue. b. Price equals Demand. c. The Marginal Revenue curve is steeper than the Demand curve. d. Marginal Revenue equals Price at each Output. $$$
Exhibit 23-9 Price (dollars) $10 9 8 7 6 5 4 3 2 1 25; 7 20; 8 35; 5 Refer to Exhibit 23-9. A single-price monopolist that seeks to maximize profits will sell of ________ dollars. 10; 10 Quantity Sold (units) 45; 3 10 15 20 25 30 35 40 45 50 55 Total Cost (dollars) $ 51 75 99 125 150 175 200 225 250 275 units and charge a per-unit price
38. The manufacture of Prolene is an industry that offers such large production economies of scale that single-firm production of the product is the most efficient industry structure. This industry can, therefore, be described as a pure monopoly an actual monopoly a government franchise monopoly a natural monopoly 40. In relation to the accountability of directors under the UK Corporate Governance Code, which of the following statements is true? The board should conduct a review of the effectiveness of the company's internal control systems at least annually, and of its risk management systems every two years The board should conduct a review of the effectiveness of both the company's risk management systems and its internal control systems every two years The board should conduct a review of the effectiveness of the company's risk management systems at least annually, and of its internal control systems every two years The board should conduct a review of the effectiveness of both…
20 10 MRI 8 10 12 14 16 QUANTITY (Thousands of subscriptions) 18 20 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 folowing table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. 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. 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 telephone company most likely do? Work to decrease its costs O…
1. Natural Monopoly Given the inverse supply and inverse demand equation below, 1 PD 3D + 40 Ps= -5QD + 30 a. Find the equilibrium without any government intervention (Q* = 21.4, P* = 32.9) b. If the market is to be regulated, find the minimum subsidy to get an optimal equilibrium (562.5) 2. Two sided bidding These are the list of bids from electricity producers as well electricity distribution firms. Electricity producers Electricity distribution Asking price/KWh quantity/KWh Asking price/KWh quantity/KWh 25 $ 35 $ $ $ $ $ 0.77 0.36 0.48 0.55 0.68 35 35 30 40 SSSS 0.50 0.38 0.57 0.68 0.44 60 20 15 40 a. Find the optimal market price and quantity (P* = 48 to 50, Q* = 70) b. Find the total welfare 3. Peak-load pricing Given the following peak demand and off peak demand, Qpeak = -Pp + 120 Qoffpeak = -2PD + 60 a. If the operational cost for off peak and peak period is $5 and the capital cost is $50, find the optimal pricing mechanism! (PPeak = $55, Poffpeak = $5) b. If the capital cost is…
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Consider the following demand and cost information for a monopoly. Quantity 12345 2 3 4 $10 To maximize profit, the monopolist sets price at (Hint: What price will get consumers to buy the profit maximizing output you find in the previous question?) $15 $20 Price $30 $25 $20 $15 $10 $25 Total Cost $3 $7 $12 $18 $25
Exhibit 9-4: A Monopoly Quantity Total Fixed Total Variable Price Demanded Cost Cost $100 0 $30 $0 90 1 $30 20 80 2 $30 48 70 3 $30 78 60 4 $30 110 50 5 $30 150 Refer to Exhibit 9-4. At an output level of 5 units, the monopolist earns a total profit of about ________. Group of answer choices $100.00 $70.00 $102.00 $82.00

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