The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas 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) 20 18 16 14 12 10 8 2 0 0 1 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 ATC MC 9 10 D + Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it.

The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas 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) 20 18 16 14 12 10 8 2 0 0 1 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 ATC MC 9 10 D + Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it.

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

4) A monopolist faces a market inverse demand function: P = 250 – 5Q and marginal cost function: ATC = MC = 10. Answer the following. If the monopolist employs a single price strategy, what is the optimal quantity produced and price charged. What is the market up and contribution margin from the strategy in part a if Ed = -1.0833. If other firms trying to enter this market had slightly higher cost structures, what would be a good price & quantity mix to limit entry of competition and why (no math needed). If the monopolist could create a bundled good instead of the strategy in part a, what price would it charge and how many units would be sold in the bundle. What are the profits from part a & part d? Which pricing strategy is preferred. EC: Briefly explain why a firm that offers a buy 2 get the 3rd free deal, does not just offer that same product at a 33.33% discount of the normal stated price. Need help with number 2.
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
Please refer to the figure provided. Imagine that this market could be perfectly competitive, controlled by a monopolist who charges a single price or a monopolist who charges each customer a different price 1. How much is producer surplus if the market is controlled by a single-price monopolist? $ 2. Suppose now the monopolist is able to charge all customers the maximum price they are willing to pay, how much is the producer surplus?
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.
Consider the electricity industry, in which there are very large fixed costs but also in which variable costs are directly proportional to total output so that the marginal cost of each unit produced is small and constant. a) Assuming that one firm has an electricity monopoly, draw a diagram that shows the price the monopolist charges and the quantity the monopolist sells at this price. Be sure to include marginal cost, average total cost, marginal revenue, and demand curves in your diagram. What happens if the electricity industry is perfectly competitive? More specifically, let us assume that the marginal cost curve from part (a) is equal to the perfectly competitive market supply curve. In this case, show in a diagram what the perfectly competitive equilibrium price and quantity in this industry are. What will happen to the number of firms producing electricity in the long run? What does this say about the desirability of monopoly vs. perfect competition in this industry?…
Question 2: Suppose a monopoly firm produces bicycles and can sell 10 bicycles per month at a price of $700 per bicycle. In order to increase sales by one bicycle per month, the monopolist must lower the price of its bicycles by $100 to $600 per bicycle. What is the marginal revenue of the eleventh bicycle?
You own a road resurfacing business called Dahyun Bricks services located in Seoul. You are the only reservicing business in South Korea. Therefore, you have a local monopoly. Your experience running the company for many years has taught you that market demand for your service can be described by the demand function: p = 20 - Q. The cost function is c =q². Therefore, marginal cost equals 2q. Quantity refersto square metre of road resurfacing. Note the Q denotes aggregate market demand and q denotes your production. Of course, if you are the only supplier than q = Q. a) Compute profit maximising price and output. Compute profits. b) The monopoly profit that you have been earning has attracted attention from another firm that will set up operations in South Koreaand compete for market share. You are concerned with losing market share and profit. So, you offer the potential entrant the following deal. Both firms agree to maximise industry profits (joint profits). The potential entrant…
BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. Suppose that BYOB charges $2.50 per can. Your friend Charles says that since BYOB is a monopoly with market power, it should charge a higher price of $3.00 per can because this will increase BYOB’s profit. Complete the following table to determine whether Charles is…
Give typed explanation
d. Suppose the government imposes an average pricing rule, requiring the monopolist to set its price equal to the average total cost. Place the point labeled “Average cost pricing” at the appropriate coordinates to indicate the firm's price and quantity under this rule. Please place the Monoploy Pricing, Marginal Cost Pricing, and Average Cost Pricing on their appropriate places on the graph. Thank you!
You are the manager of a monopoly. Your analytics department estimates that a typical consumer’s inverse demand function for your firm’s product is P = 400 −20Q, and your cost function is C(Q) = 120Q.a. Determine the optimal two-part pricing strategy. Per-unit fee: $ Fixed fee: $ b. How much additional profit do you earn using a two-part pricing strategy compared with charging this consumer a per-unit price?
pic 1 : Many schemes for price discriminating involve some cost. For example, discount coupons take up the time and resources of both the buyer and the seller. This question considers the implications of costly price discrimination. To keep things simple, suppose that our monopolist's production costs are simply proportional to output, so that average total cost and marginal cost are constant and equal to each other. On the following graph, use the grey point (star symbol) to indicate the price and quantity that would emerge under a monopoly without price discrimination. Then use the purple point (diamond symbol) to shade the area corresponding to the monopolist's profit, and use the green point (triangle symbol) to shade the area corresponding to consumer surplus. Finally, use the black point (plus symbol) to shade the area corresponding to deadweight loss. Let the region representing monopolist's profit be called XX, consumer surplus YY, and deadweight loss ZZ. Suppose the…