Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Complete the first row of the following table. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Complete the third row of the previous table. ||||| O True Profit Suppose now that the government decides to require the monopolist to set its price equal to average total cost. O False Long-Run Decision True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Complete the first row of the following table. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Complete the third row of the previous table. ||||| O True Profit Suppose now that the government decides to require the monopolist to set its price equal to average total cost. O False Long-Run Decision True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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