Please correct answer and don't used hand raiting Suppose a local cable company provides cable service to a rural community. The figureto the right illustrates the cable company's marginal cost of providing cable service alongwith the community's demand for cable TV.Assume the local cable company is a monopoly.When the company maximizes profits, consumer surplus equals $response using a real number rounded to one decimal place)(enter a numeric---Price and cost (dollars per cable subscription)Q120-110-100-MC✓90-80-70-60-50-40-30-20-10-010MRD20 30 40 50 60 70 80 90 100Quantity of cable subscriptions

Step 1:Consumer surplus is the difference between what consumers are willing to pay for a good or…

Answered: Suppose a local cable company provides…

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 3SCQ: Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into...

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Similar questions

Can you think of any examples of successful predatory pricing in the real world?
What is the usual shape of a total revenue curve for a monopolist? Why?
In what sense is a natural monopoly natural?
What is a natural monopoly?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as the incumbent tries to bleak into the market by selling 4,000 units of output. Estimate from the graph what the new firms average cost of producing output would be. If the incumbent continues. to produce 6,000 units, how much output would the two films supply to the market? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn? Figure 9.2 Economics of Scale and Natural Monoploy
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?
If public utilities are a natural monopoly, what would be the danger in splitting them into a number of separate competing firms?
What is a legal monopoly?

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