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

See similar textbooks

Similar questions

Suppose the market for ice-cream has one dominant firm and five small firms. The aggregate market demand for ice-cream is given by Q = 200 − P . Consider that the dominant firm is acting like a monopolist and all five small fringe firms are price takers. Dominant firm’s marginal cost (MC) of producing ice-cream is given as 10 and each small fringe firm has marginal cost M C = 10 + 2.5q where q =quantity of ice-cream. Dominant firm faces the residual demand which is the aggregate demand less of quantity supplied by all smaller fringe firms together. (a) Find the profit-maximising quantity produced and price charged by the dominant firm, and the quantity produced by each of the small fringe firms. (b) Find producer surplus of the dominant firm. (c) Suppose there are 10 small firms instead of 5. How does this change your results?
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 0 0 1 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 True ATC MC O False 9 10 D The water company is experiencing economies of scale. Which of the following statements are true about this natural monopoly? Check all that apply. + Monopoly Outcome The water company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. In order for a monopoly to exist in this case, the government must have intervened and created it.…
In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Price Quantity (Dollars) (Hot dogs) Competitive Monopoly
8. Natural monopoly analysis 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 7 8 2 3 4 5 6 QUANTITY (Hundreds of cubic feet) ATC MC 9 10 D + Monopoly Outcome ?
A monopolist faces two demand curves in two separate markets. The Market Demand in the first market is P1=100-Q1 and in the second market it is P2=50-0.5Q2. The marginal & average costs are constant at 10 (MC=AC=10). Find the Monopoly Price and Quantity in each market. Find the Perfect Competition Price and Quantity in each market. Calculate Profit, Social Welfare (Consumer and Producer Surpluses), and Dead Weight Loss in both situations and in both markets.
Initially, a profit maximizing local monopolist charges $15 and sells 500 units per week. Per unit variable cost is $10. Now assume the local government begins to provide 100 units per week at the market price. As a result, the market price falls to $13 and the quantity sold by the monopolist falls to 430. a) Find the changes in Consumer surplus , Producer surplus , and Government surplus created by the monopoly. b) Assume the METB (marginal excess tax burden)is 0.25. Find the changes in SS. c) Depict all of this in a diagram.
Consider the only internet service provider in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for internet services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. PRICE (Dollars per subscription) 100 20 88288 2 10 ATC MC MR D 0 + + 0 2 4 6 8 10 12 14 16 18 20 QUANTITY (Thousands of subscriptions) (?.
A simple profit-maximizing monopolist with a continuous linear demand curve has positive marginal costs at all levels of production above X = 0. Which one of the following statements is FALSE in the short run? Select one: a. At the chosen level of output, an increase in the price of the good will necessarily reduce total revenue b. At the chosen level of output, the monopolist is not maximizing total revenue C. At the chosen level of output, demand for the good is price elastic d. At the chosen level of output, economic profit is necessarily positive
The graph above shows the cost and revenue curves for a natural monopoly that provides electrical power to the town of Fanaland. If unregulated, the monopolist operates to maximize its profit. (a) Identify the monopolist’s profit-maximizing quantity and price. (b) Assume the town government of Fanaland regulates the monopolist’s price to achieve the allocatively efficient quantity. What price would the government set in order to achieve the allocatively efficient quantity? (c) Will producing the allocatively efficient quantity be economically feasible for the monopolist? Explain. (d) Suppose instead the town government wants to regulate the monopolist to earn zero economic profit. What price would the government set to have the monopolist earn zero economic profit? (e) Based on your answer to part (d), will the deadweight loss increase, decrease, or stay the same as that of the unregulated monopolist? Explain.
You are considering entering a market serviced by a monopolist You are considering entering a market serviced by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If the monopolist doesn’t engage in a price war, you will each earn profits of $2.There are two possible solutions or equilibria. What are they? You are considering entering a market serviced by a monopolist
Consider the only internet service provider in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for internet services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. PRICE (Dollars per subscription) 100 88 70 00 50 40 30 20 10 0 0 11 11 2 11 11 11 MR ATC -MC- 468 10 12 14 16 QUANTITY (Thousands of subscriptions) 18 20 D ?
Scenario: Suppose that the demand is given by: P = 100 - Q Marginal Revenue is MR = 100 - 2Q and Total Cost function is: TC(Q) = 200 Assume the firm is a price-maker (monopolist). What will be the optimal quantity (Q") under the two-part pricing? (Hint: plug the price into the demand equation)