The given terms refer to different approaches to regulating natural monopolies. Place each with its corresponding description. A firm is allowed to price its product so that it earns a normal return on capital invested. Firms are directed to charge the price associated with the extra cost of making each unit. This pricing rule often leads to firms earning a negative profit. Firms charge a price that allows them to earn only a normal economic profit. This places maximum limits on the price firms can charge for a good Answer Bank average cost pricing rule rate of return regulation marginal cost pricing rule price caps

The given terms refer to different approaches to regulating natural monopolies. Place each with its corresponding description. A firm is allowed to price its product so that it earns a normal return on capital invested. Firms are directed to charge the price associated with the extra cost of making each unit. This pricing rule often leads to firms earning a negative profit. Firms charge a price that allows them to earn only a normal economic profit. This places maximum limits on the price firms can charge for a good Answer Bank average cost pricing rule rate of return regulation marginal cost pricing rule price caps

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Saltanat has a monopoly on ginger (имбирный) cookies in Almaty. The inverse demand function for the cookies is P = 100 – Q, where P denotes price and Q denotes quantity. The marginal cost is zero. a)Calculate P, Q and profits, if Saltanat maximizes profits. b) Now suppose instead that the ginger-cookie industry is competitive. Calculate P, Q and profits.
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 ?
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Problem 3. Suppose a company has a fixed cost of 20 and a marginal cost that is constant at 2. The demand curve is P=24-Q. Explain why this is a natural monopoly. Contrast regulation that sets the price at marginal cost with regulation that sets it at average cost. How do the outputs and surpluses differ? Calculate the DWL under average cost pricing. Illustrate outputs, prices, and DWL in a diagram.
2. Study Questions and Problems #2 A is the one and only producer in a market, while a market. Due in large part to these characteristics, a is one of many producers in a faces a horizontal demand curve, and a faces a downward-sloping demand curve. Grade It Now Save & Continue
Exercise 3.8. Dayna's Doorstops, Inc. (DD) is a monopolist in the doorstop industry. Its cost is C = 100 - 5Q + Q², and demand is P = 55 - 2Q. a) What price should DD set to maximize profit? What output does the firm produce? How much profit and consumer surplus does DD generate? b) What would output be if DD acted like a perfect competitor and set MC = P? What profit and consumer surplus would then be generated? c) What is the deadweight loss from monopoly power in part (a)? d) Suppose the government, concerned about the high price of doorstops, sets a maximum price at $27. How does this affect price, quantity, consumer surplus, and DD's profit? What is the resulting deadweight loss? e) Now suppose the government sets the maximum price at $23. How does this decision affect price, quantity, consumer surplus, DD's profit, and deadweight loss? f) Finally, consider a maximum price of $12. What will this do to quantity, consumer surplus, profit, and deadweight loss?
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Lagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able price discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) curves that Lagatt Green faces for beer in Lightington. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Lagatt Green is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE (Dollars per bottle) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 D MC D 15 20 25 30 3.5 QUANTITY (Thousands of bottles of beer) 45 ATC MR Price (Dollars per bottle) 2.00 2.25 40 Monopoly Outcome…
USUALLY THERE IS MORE THAN ONE !! ANSWER!!! Select the statements below that are consistent with the input choice decisions of profit-maximizing competitive firms and monopolies. Choose one or more: A. Monopolistic firms choose inputs of production at the point where the marginal revenue from each input equals the marginal cost. Competitive firms do not. B. Competitive firms choose inputs of production at the point where the marginal revenue from each input equals the marginal cost. Monopolies do not. C. For competitive firms, the marginal revenue product of an input equals the value of the marginal product. D. If the demand for a product is perfectly elastic, all else being equal, the optimal amount of an input of production is the same for a monopolist as it is for the competitive market as a whole. E. For a monopoly facing a downward-sloping demand curve, the marginal revenue product of an input equals the value of the marginal product. F. Competitive firms and monopolies choose…
Natural monopolies often occur because of huge economies of scale. is this true or false