Economics Suppose a monopoly operates two shops along a one-mile street of 3,000 consumers, has marginal cost of c = 250 and the fixed cost Fof each shop is 50,000. Also, consumers only buy one unit and have a reservation value of V =1,000. Consumers also incur there-and-back travel costs of t = 120 per mile. What is total profit if the monopolist serves the entire market with two shops? Select one: а. 1.1 million b. 2.1 million С. 1.8 million d. 1.4 million

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.)

How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive film?

How does the demand curve perceived by a monopolist compare with the market demand curve?

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

part 9 10 11 9. How doesthe price and output of a monopolist differ from thatofthe perfectly competitive A:industry? i.10. Whatportion of the consumer surplusin the competitive situation wastransferredto the firm inthe monopoly situation?11. How does a monopoly affect consumersurplus? Is this good or bad?

Many schemes for price discrintination involve somecosL For example, discount coupons take up the timeand resources of both the buyer and the seller. Thisquestion considers the implications of costly pricediscrimination. To keep things simple, let's assumethat our monopolist's production costs arc simplyproportional to output so that average total cost andmarginal cost arc constant and equal to each other.CHAPTER 15 MONOPOLY 317a. Draw the cost., demand, and marginal-revenuecurves for the monopolist. Show the pricethe monopolist would charge without pricediscrimination.b. ln your diagram, mark the area equal to the mernopolist's prolit and call it X. Mark the area equalto consumer surplus and call it Y. Mark the areaequal to the deadweight loss and call it Z.c. Now suppose that the monopolist can perfectlyprice discriminate. What is the monopolist'sprofit? (Give your answer in terms of X, Y, and Z.)d. What is the change in the monopolist's prolit fromprice discrimination? What is the…

Q80

Price and cost MO 120 Township is a small, isolated community served by one newspaper that can meet the market demand at a lower cost than two or more newspapers could. The Township Gazette is the only source of news. The graph shows the marginal cost of printing the Township Gazette and the market demand for it. The Township Gazette is a profit-maximizing, single-price monopoly. What is the efficient number of copies of the Township Gazette and what is the price at which the efficient number of copies could be sold? 100- The efficient number of copies of the Township Gazette is and the price at which this number could be sold is cents a copy. GALLE 80- 60- 40- 20- D 04 0 100 200 300 400 500 Quantity (newspapers per day) 600 5

A natural monopoly exists when one firm can supply an entire market at a lower average total cost than can two or more firms, O a firm can engage in price discrimination. O a monopoly firm faces a horizontal demand curve. O the producers in an industry have formed a cartel. diseconomics of scale cxist in an industry.