8. Natural monopoly analysisThe 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 metres)22018161412108MRATCMC0012 345678910QUANTITY (Hundreds of cubic metres)D+Monopoly Outcome(?Which of the following statements are true about this natural monopoly? Check all that apply.It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.The gas company is experiencing economies of scale.The gas company is experiencing diseconomies of scale.The gas company must own a scarce resource.True or False: Without government regulation, natural monopolies never earn zero profit in the long run.TrueFalse

A natural monopoly is a monopolist which enjoys very low cost of production and therefore offers…

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 metres) 20 18 16 14 12 10 Co 2 MR 0 01 2 3 4 567 ATC MC D 8 910 QUANTITY (Hundreds of cubic metres) + Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The gas company is experiencing economies of scale. The gas company is experiencing diseconomies of scale. The gas company must own a scarce resource. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False

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 metres) 20 18 16 14 12 10 Co 2 MR 0 01 2 3 4 567 ATC MC D 8 910 QUANTITY (Hundreds of cubic metres) + Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The gas company is experiencing economies of scale. The gas company is experiencing diseconomies of scale. The gas company must own a scarce resource. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 = 200 − 20Q, and your cost function is C(Q) = 80Q.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?
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…
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. NOTE: read question carefully and answer accordingly
A monopolist book publisher with a constant marginal cost of 2 and no fixed costs sells novels in only two countries. Assume the inverse demand curve in country 1 is given by P₁ = 10-Q and the inverse demand curve in country 2 is given by P₂ = 18-Q Assuming book shipments across countries are banned so that price discrimination occurs. What is the equilibrium price and quantity of books sold by the monopolist in country 1? Continuing to assume price discrimination, what is the equilibrium price and quantity of books sold by the monopolist in country 2? If book imports are permitted in both countries so that price discrimination is impossible, what is the equilibrium price and quantity sold in the two countries combined? P=1, Q=16 P=1, Q=12 P=4, Q=8 11 P=6, Q=6 P=4. Q=14 P=6, Q=12 P=8, Q=10 P=10, Q=8 P=6, Q=20 P=7, Q=20 P=10, Q=8 P=12, Q=6
Monopolists, unlike competitive firms, have some market power. A monopolist can increase price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Economies of Scale Scenario In the natural gas industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the…
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P=15−QP=15−Q Marginal Revenue: MR=15−2QMR=15−2Q Total Cost: TC=3+Q+0.5Q2TC=3+Q+0.5Q2 Marginal Cost: MC=3+QMC=3+Q where QQ is quantity and PP is the price measured in Wiknamian dollars. The monopolist produces ( ? ) soccer balls and sells them at a price of ($) each. The monopolist's profit is ($) in this case. One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market. The domestic production of soccer balls will ( rise or fall ) ? to ( ? ) soccer balls, and domestic consumption will ( rise or fall ) to ( ? ) soccer balls. Therefore, Wiknam will (…
Refer to the accompanying table, which represents the costs and production for a monopolist. Price Quantity Fixed Cost Variable Cost $20 0 $10 $0 $18 1 $10 $5 $16 2 $10 $8 $14 3 $10 $18 $12 4 $10 $30 $10 5 $10 $44 1) At Q=2, the marginal cost of this firm is $ ____ 2)The profit made by this profit-maximizing firm is $ __
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 CQ) = 120Q a. Determine the optimal two-part pricing strategy. Per-unit fee: $ 120 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?
If the inverse demand curve is p=100-Q and the marginal cost is constant at $10, how does charging the monopoly a specific tax of t= $12 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes the tax revenue)? What is the incidence of the tax on consumers? As a result of the tax, the profit-maximizing quantity decreases by 6 units and the profit-maximizing price increases by $6. (Enter numeric responses using real numbers rounded to two decimal places.) Show Transcribed Text Consumer surplus by $ The monopoly's surplus (producer surplus) Finally, society's welfare by $. The consumer incidence of the tax is%. by S.
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