Suppose that Comcast has a cable monopoly in Philadelphia. The following table gives Comcast's demand and costs per month for subscriptions to basic cable (for simplicity, we keep the number of subscribers artificially small). Quantity 3 4 Total Revenue 5 6 7 8 153 192 Price 51 108 48 129 45 153 42 180 39 210 36 243 Suppose the local government imposes a $73 per month tax on cable companies. What will Comcast do? (Assume fixed costs equal $45.) 225 252 273 288 Marginal Revenue OA. Comcast should produce 6 units in the short run and shut down in the long run. O B. Comcast should shut down in the short run and produce 6 units in the long run. OC. Comcast should shut down in the short run and in the long run. O D. Comcast should produce 6 units in the short run and in the long run. OE. None of the above. Total Cost 39 33 27 21 15 Marginal Cost 21 24 27 30 33 Suppose that the flat per-month tax is replaced with a tax on the firm of $12 per cable subscriber. (Assume that Comcast will sell only the quantities listed in the table). To maximize profit, Comcast will sell subscriptions (enter a numeric response using an integer) and charge a price of $ for profits of $

Suppose that Comcast has a cable monopoly in Philadelphia. The following table gives Comcast's demand and costs per month for subscriptions to basic cable (for simplicity, we keep the number of subscribers artificially small). Quantity 3 4 Total Revenue 5 6 7 8 153 192 Price 51 108 48 129 45 153 42 180 39 210 36 243 Suppose the local government imposes a $73 per month tax on cable companies. What will Comcast do? (Assume fixed costs equal $45.) 225 252 273 288 Marginal Revenue OA. Comcast should produce 6 units in the short run and shut down in the long run. O B. Comcast should shut down in the short run and produce 6 units in the long run. OC. Comcast should shut down in the short run and in the long run. O D. Comcast should produce 6 units in the short run and in the long run. OE. None of the above. Total Cost 39 33 27 21 15 Marginal Cost 21 24 27 30 33 Suppose that the flat per-month tax is replaced with a tax on the firm of $12 per cable subscriber. (Assume that Comcast will sell only the quantities listed in the table). To maximize profit, Comcast will sell subscriptions (enter a numeric response using an integer) and charge a price of $ for profits of $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a local cable company provides cable service to a rural community. The figure to the right illustrates the cable company's marginal cost of providing cable service along with the community's demand for cable TV. Assume the local cable company is a monopoly. When the company maximizes profits, consumer surplus equals $200, and producer surplus equals $_______. Compared to the perfectly competitive market outcome, the cable company creates a deadweight loss equal to $______.
You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically. What are the profit, producer surplus and consumer surplus? The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this perfectly competitive environment, what would be the equilibrium price and quantity? Explain this in words and show it graphically. What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)? How much would you be willing to pay to keep the government from taking your monopoly away? Explain.
3) Suppose a monopolist produces a product in two factories. Demand for the product is given by the following linear demand function: P = 200- Qr where Qr is the quantity sold by the firm and P is the selling price. Total cost functions for the two factories are: TCA= 1500 + 55QA + Q²A and TCB = 1200 + 20QB+ 2Q²B. Determine the profit maximizing QA, QB, its selling price, and its profit.
A patent gave Sony a legal monopoly to produce a robot dog called Aibo ("eye-BO"). The Chihuahua-size pooch robot can sit, beg, chase balls, dance, and play an electronic tune. When Sony started selling the toy in July 1999, it announced that it would sell 3,000 Aibo robots in Japan for about $2,000 each and a limited litter of 2,000 in the United States for $2,500 each. Suppose that Sony's marginal cost of producing Aibos is $500. Its inverse demand curve is Pj = 3500 - 0.5Qj in Japan and Pa = 4500 - Qa in the United States. Solve for the equilibrium prices and quantities (assuming that U.S. customers cannot buy robots from Japan). The equilibrium quantity in Japan is 3000 and the price, pj, is $ 2000. (round your answers to the nearest integer) The equilibrium quantity in the U.S. is 2000 and the price, pa, is $ 2500. (round your answers to the nearest integer) Show how the profit-maximizing price ratio depends on the elasticities of demand in the two countries. Pj Pa 1+1/a 2,000…
1. Calculate the profit-maximizing quantity and price for the non-student market. (attached Figure A: Non-Students) 2. Calculate the profit-maximizing quantity and price for the student market. (attached Figure B: Students) 3. Calculate the profit if the firm charges both the non-students and students the same price of $20. (attached Figure A: Non-Students and Figure B: Students) 4. Calculate the profit if the monopoly firm perfectly price discriminates. (attached Figure A: Non-Students and Figure B: Students)
To answer this question, you will want to work out the answer using a graph on a piece of scratch paper (not turned in). You are going to compare the outcomes in the case where there is perfect competition to the monopoly case. So, as an intermediate step, you will need to compute the equilibrium outcomes under competition and monopoly. Suppose that you have the following information about the demand for oil. Price ($/barrel) 80 70 60 50 40 30 20 10 Suppose that the marginal cost to produce a barrel of oil is $20. What is the deadweight loss if the oil market is a monopoly? Quantity demanded(# barrels) 5 6 7 8 9 10 11 12
A patent gave Sony a legal monopoly to produce a robot dog called Aibo ("eye-BO"). The Chihuahua-size pooch robot can sit, beg, chase balls, dance, and play an electronic tune. When Sony started selling the toy in July 1999, it announced that it would sell 3,000 Aibo robots in Japan for about $2,000 each and a limited litter of 2,000 in the United States for $2,500 each. Suppose that Sony's marginal cost of producing Aibos is $500. Its inverse demand curve is P₁ = 3500-0.5Q in Japan and Pa = 4500-Qa in the United States. Solve for the equilibrium prices and quantities (assuming that U.S. customers cannot buy robots from Japan). The equilibrium quantity in Japan is 3000 and the price, p, is $ 2000. (round your answers to the nearest integer) The equilibrium quantity in the U.S. is 2000 and the price, p, is $ 2500 (round your answers to the nearest integer) Show how the profit-maximizing price ratio depends on the elasticities of demand in the two countries. I Pl 2,000 1+1/a 1+1/ Pa…
Use the following to answer questions (27) and (28): Suppose market A is currently purely competitive, with consumer surplus equal to $250, producer surplus equal to $250, and the market price equal to $5. Suddenly the firms in this market merge together, effectively becoming a monopoly. As a result, consumer surplus decreases to $100, producer surplus increases to $300, and the market price increases to $8. [27] When market A is purely competitive, market welfare equals $250. A. B. [28] A. B. C. D. True False The deadweight loss in welfare associated with monopoly in this case equals: $0 $50 $100 $3
The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per hundred cubic feet) 40 36 32 28 24 20 16 12 8 4 0 +↓ 0 + 1 MR 8 3 4 5 6 7 QUANTITY (Hundreds of cubic feet) True 2 ATC False 9 10 D Which of the following statements are true about this natural monopoly? Check all that apply. Monopoly Outcome In order for a monopoly to exist in this case, the government must have intervened and created it. The water company is experiencing diseconomies of scale. The water company is experiencing economies of scale. The water company must own a scarce resource. True or False: Without government regulation, natural…
1. Natural Monopoly Given the inverse supply and inverse demand equation below, 1 -30D + 40 1 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 as electricity distribution firms. Electricity producers Electricity distribution Asking price/KWh quantity/KWh Asking price/KWh quantity/KWh 25 35 35 60 35 20 30 15 40 40 $ $ $ $ $ PD = - 0.77 0.36 0.48 0.55 0.68 $ $ $ S $ 0.50 0.38 0.57 0.68 0.44 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-PD + 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…
Question 3
Suppose that Comcast has a cable monopoly in Philadelphia. The following table gives Comcast's demand and costs per month for subscriptions to basic cable (for simplicity, we keep the number of subscribers artificially small). Total Marginal Total Marginal Price Quantity 3 Revenue Revenue Cost Cost 68 204 144 64 4 256 52 172 28 60 300 44 204 32 56 336 36 240 36 52 7 364 28 280 40 48 384 20 324 44 Suppose the local government imposes a $99 per month tax on cable companies. What will Comcast do? (Assume fixed costs equal $60.) A. Comcast should produce 6 units in the short run and shut down in the long run. B. Comcast should shut down in the short run and in the long run. c. Comcast should produce 6 units in the short run and in the long run. D. Comcast should shut down in the short run and produce 6 units in the long run. E. None of the above. Suppose that the flat per-month tax is replaced with a tax on the firm of $4 per cable subscriber. (Assume that Comcast will sell only the…