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- From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?
- Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?O See Hint Suppose seven individuals enjoy going to the comedy club. Their demand is as follows. Person Willingness to pay Allison Beatrice Cally David Ezekiel Francesca Gertrude 20 18 16 14 12 10 8 If the comedy club had a monopoly and a marginal cost of $7 per entrant, the comedy club would sell charge only one price. tickets if it could 15/17> SUBMIT ANSWER 9 OF 17 QUESTIONS COMPLETED MacBook ProPRICE QUANTITY DEMANDED LRAC 50 1 10$ 35 2 20$ 20 3 24$ 5 4 37.50$ The table above shows demand and average total cost for a natural monopoly firm. What will the price will this firm charge? A 20 B 50 C 35 D 5 Question 2 Based on the graph above, find the profit maximizing price and quantity for this monopoly firm. Question 14 options: $36 and 200 units $36 and 300 units $48 and 200 units $60 and 100 units
- Question 2 The graph below shows the market in which a monopoly operates. 6. 5.5- 3 ATC D MR 10 14 B MC When the monopoly maximizes profit, how much is the amount of profit? O $6.00 $3.00 $4.00 $5.00Price and cost MO 120 Township is a small, isolated community served by one newspaper that can meet the market demand at a lower cost than two or more newspapers could. The Township Gazette is the only source of news. The graph shows the marginal cost of printing the Township Gazette and the market demand for it. The Township Gazette is a profit-maximizing, single-price monopoly. What is the efficient number of copies of the Township Gazette and what is the price at which the efficient number of copies could be sold? 100- The efficient number of copies of the Township Gazette is and the price at which this number could be sold is cents a copy. GALLE 80- 60- 40- 20- D 04 0 100 200 300 400 500 Quantity (newspapers per day) 600 5A natural monopoly exists when one firm can supply an entire market at a lower average total cost than can two or more firms, O a firm can engage in price discrimination. O a monopoly firm faces a horizontal demand curve. O the producers in an industry have formed a cartel. diseconomics of scale cxist in an industry.
- Why is this true?: When a monopoly chooses a quanity or price combination that is on the price inelastic portion of the linear market demand cuve, it is not maximizing profit. Explain why.The following graph shows a monopoly. Which coordinate area represents the deadweight- loss generated by a monopoly? $14 $12 $10 $8 $6 $4 $2 SO la 9 U. o.. A. Area e,f,h B. Area a,b,e C. Area b,d,ge D. Area c,d,g,f 50 100 150 (D 6.0 g 200 250 MC 300 D MR 350Figure 15-3 ↑ Price P4 P3 P2 Pl PO Curve C Curve B Curve D Curve A 20/1/02 03 04 Refer to Figure 15-3. The marginal cost curve for a monopoly firm is depicted by curve a. D. b. A. c. B. d. C. Quantity
