The following graph gives the demand (D) curve for 5G LTE 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 5G LTE 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 gigabyte of data) 20 18 16 14 12 10 CO 6 4 2 0 0 1 2 MR 4 3 5 7 QUANTITY (Gigabytes of data) 6 8 ATC MC 9 10 D Monopoly Outcome

The following graph gives the demand (D) curve for 5G LTE 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 5G LTE 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 gigabyte of data) 20 18 16 14 12 10 CO 6 4 2 0 0 1 2 MR 4 3 5 7 QUANTITY (Gigabytes of data) 6 8 ATC MC 9 10 D Monopoly Outcome

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 4 Consider a monopolist facing two consumers with the following two inverse demand functions: P=200-4Q₁ and P=122- 6Q2. Assume that fixed costs are zero and that the marginal cost is equal to $8. a) Suppose the monopolist can differentiate between the two consumers. The monopolist decides to use a two- part tariff that permits both consumers to stay in the market. Solve for each consumer's demand, fixed fee and monopolist profits. b) Assume the monopolist cannot differentiate between the two consumers and hence cannot apply a two-part tariff. decides to serve both consumers. Solve for the equilibrium aggregate demand and price in market, demand of each consumer and the monopolist profit. c) Now assume the monopolist decides not to serve the low demand consumer. Solve for price, demand and monopolist profits. Is the monopolist better off as a result of eliminating the low-volume consumer from the market?
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The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for a monopolist. Suppose that this monopolist cannot price discriminate. Place the grey point (star symbol) on the graph to indicate the profit-maximizing price and quantity for this monopolist. If the monopolist is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if the monopolist is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE AND COST (Dolars) 100 8 8 R 90 70 329222 50 10 0 0 10 MC 20 30 MR 60 50 QUANTITY 40 ATC 79 00 D 90 100 . Monopoly Outcome Profit Loss
5
Consider the graph below that represents the demand curve for a good, the marginal revenue of a potential monopolist, and the marginal cost before an innovation (MC1 = 1) and after a potential innovation of size y (MC2 = 1/y). In the initial period, all firms have the same marginal cost MC1. A single firm can choose to try to innovate. If it is successful, it becomes a monopolist in the second period with marginal cost MC2. 1 1/Y Demand Marginal revenue MC1 MC2 ୪
A movie monopolist sells to college students and other adults, as in Worked-Out Problem 18.2 (page 635). The demand function for students is Q = 1,400-50P, and the demand function for other adults is Q = 1,800 - 50P. Marginal cost is $4 per ticket (instead of $2 per ticket, as in the Worked-Out Problem). Instructions: Round your answers to 2 decimal places. a. What prices will the monopolist set when she can discriminate? How will discrimination affect her profit? Pstudent = $ per ticket. = $ Padult Profit = $ b. What prices will the monopolist set when cannot discriminate? How will it affect her profit? = $ per ticket. per ticket. Peveryone Profit = $
In the linear example illustrated in the figure to the right, how does charging the monopoly a specific tax of t= $4 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes tax revenue)? What is the incidence of the tax on consumers? Determine how imposing the tax affects the monopoly optimum. Use the line drawing tool to show how the tax affects the monopoly's cost of production by drawing a new marginal cost curve with the tax. Label this line "MC". Carefully follow the instructions above, and only draw the required objects. p. $ per unit 26- 24- 22- 20- 184 d 16- 14- 124 à 104 84 6 4- 23 MC D MR 5 6 7 8 9 10 11 12 13 14 Q. Units per day dou
George has a monopoly on burrito sales in a small town in Kansas. The burritos cost him a constant $5 each to produce. He faces following demand schedule for his product: Price Quantity Demanded $30 0 $25 1 $20 2 $15 3 $10 4 $5 5 $0 6 Under normal monopoly conditions, how many burritos should he produce, what price should he charge, and how much profit can he expect to make? Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus, and deadweight loss. If George could engage in perfect price discrimination, how many burritos would he produce, what would his total revenue be, and how much profit would he earn? Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus, and deadweight loss. Is society better off by allowing George to perfectly price discriminate? Defend your answer.
Please solve for ( b).
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.…
Use the following graph of a monopoly market to answer this question: P $13 $10 150 300 Which of the following statements is an accurate interpretation of the graph? This firm engages in perfect price discrimination; 150 of its customers are willing to pay exactly $13, and 150 are willing to pay exactly $10. This firm price-discriminates by selling its product for $13 to the 150 consumers willing to pay at least $13, and selling it for $10 to the 150 consumers willing to pay between $10 and $13. This firm engages in price discrimination by negotiating on price with each of its customers. This firm price-discriminates by selling its product for $13 to the 150 consumers willing to pay at least $13, and selling it for $10 to the 300 consumers willing to pay between $10 and $13. This firm engages in perfect price discrimination; 150 of its customers are willing to pay exactly $13, and 300 are willing to pay exactly $10.
In the linear example illustrated in the figure to the right, how does charging the monopoly a specific tax of t = $8 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes tax revenue)? What is the incidence of the tax on consumers? Determine how imposing the tax affects the monopoly optimum. Use the line drawing tool to show how the tax affects the monopoly's cost of production by drawing a new marginal cost curve with the tax. Label this line 'MC¹'. Carefully follow the instructions above, and only draw the required objects. p, $ per unit 26- 24- 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 0 2 3 4 MC D MR 5 6 7 8 9 10 11 12 13 Q, Units per day