Which of the following is correct? The price and the corresponding quantity that theregulator should choose in this market is given by(i) the intersection of MR and MC(ii) the intersection of D and MC(iii) the intersection of D and AC(iv) none of the above.Explain your answer. (b)curve MR, the marginal cost curve MC and the average cost curve AC of a naturalmonopoly. A regulator wishes to minimise the deadweight loss in this market byregulating the monopoly price. The regulator can only set a per unit price, i.e. itcannot use a more complex pricing scheme such a combination of a fixed fee and aper unit price.The graph below shows the demand curve D, the marginal revenueDACMCMRP.

A natural monopoly exists because of very large initial costs that create the barrier to entry.

Which of the following is correct? The price and the corresponding quantity that the regulator should choose in this market is given by (i) the intersection of MR and MC (ii) the intersection of D and MC (iii) the intersection of D and AC (iv) none of the above. Explain your answer.

Which of the following is correct? The price and the corresponding quantity that the regulator should choose in this market is given by (i) the intersection of MR and MC (ii) the intersection of D and MC (iii) the intersection of D and AC (iv) none of the above. Explain your answer.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter11: Monopoly And Antitrust Policy

Section: Chapter Questions

Problem 7SCQ: From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural...

See similar textbooks

Similar questions

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?
Problem 3 uppose an airline has monopoly over a certain route. The estimated price elasticity of demand for business travelers is E-12, while the price elasticity of demand for leisure travelers is Ey-24. The airline wants to set the prices separately for business and vacation travelers. Economy Firat Class Only i the marginal cost of transporting each passenger is the same, und the airline is able to separate the two groups perfoctly, what is the optimal surcharge (in ) on business travelers? Oor example. fleiture travelers pay 100, and business ravelers pay 200, then the surcharge is 100%) Anvwer b) Suppose that in order to separste business travelen, the airline must offer them slightly better conditions on board (for enample, serve them a meal). As a resul, the marginal cost of flying a basiness traveler is 30% higher than for a leivare traveler. What is the optimal surcharge (in ) on business fravelers in this case? Awwer Now suppose the airline introdaces a Basi Economy fare,…
2:03 D 19 ll 37% Marked out of 30 P Flag question Suppose you are a manager of a County government project that is meant to provide rent-regulated housing units in low-income settlements. Using your knowledge of equilibrium, advice the Governor whether this policy will be a а. success. A Monopolist producing and supplying cooking gas to Mombasa city faces the demand b. function. = 8800 – 20P. Its cost function is given by TC = 20Q + 0.05Qʻ. Determine the quantity of cooking gas she will produce and the price she will charge to maximize profits and determine her profit. i. i. Explain how her profits she will affected if regulators forced her to operate like a perfectly competitive firm. ii. Illustrate and compute dead-weight loss and lost consumer surplus associated with her Monopoly operations. B I II II !!!
Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1. a. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.b. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.c. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.
A monopoly produces a good with a network externality at a constant marginal and average cost of c-$2. In the first period, its inverse demand curve is ← p10-10 in the second period, its inverse demand curve is p-10-10 unless it sels at least Q 8 units in the first period. If it meets or exceeds this target, then the demand curve rotates out by a (t sells a times as many units for any given price), so that its inverse demand curve is The monopoly knows that it can sell no output after the second period. The monopoly's objective is to maximize the sum of its profits over the two periods. For what values of it would the monopoly earn a higher two-period profit by setting a lower price in the first period? Ifa is greater than (round your answer to two decimal places)
Suppose an airline sells air tickets to two types of customer – business travelersand vacation travelers. Their estimated demand elasticities are -2.5 and -4.0respectively.Suppose the marginal cost is constant at $240, and the services provided to thetwo types of customer are similar. Calculate the fares the airline should charge on the air tickets sold to therespective types of customers. Show your calculations.
O OO The above graph shows the market demand function for a product. Assume that the market is served by a perfectly-price-discriminating monopolist with a constant marginal cost of production equal to $4 (MC = $4) and no fixed cost (FC = 0). The deadweight loss equals: DWL - $72 DWL - $0 DWL- -$48 DWL - $84 DWL-$36 $30 $28 $26 $24 $22 $20 Question 23 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Suppose a monopoly market has a demand function in whichquantity demanded depends not only on market price (P) butalso on the amount of advertising the firm does (A, measuredin dollars). The specific form of this function isQ =(20 - P2) (1 + 0.1A - 0.01A2).The monopolistic firm’s cost function is given byC = 10Q + 15 + A.a. Suppose there is no advertising (A = 0). What outputwill the profit-maximizing firm choose? What market price will this yield? What will be the monopoly’sprofits?b. Now let the firm also choose its optimal level of advertising expenditure. In this situation, what output levelwill be chosen? What price will this yield? What will thelevel of advertising be? What are the firm’s profits in thiscase? Hint: This can be worked out most easily by assuming the monopoly chooses the profit-maximizing pricerather than quantity.
ASAP PLZ Suppose a monopolist knows it has two types of customers. The inverse demand for the customers in the first market is P = 50 – Q while the inverse demand for the customers in the second market is P = 40 – 2Q. The marginal cost is €10 in both markets. Suppose the firm wishes to charge a two-part tariff to its customers but it cannot distinguish between the customers in the first and second markets. Calculate the entry (fixed) fee that the firm should charge in these circumstances
The hgure shows the demand curve, the corresponding marginal revenue curve, and the cost structure for a monopoly that cannot price discriminate Now suppress the monopoly has the ability to practice perfect price discrimination. How will this affecti the market? Use either the triangle: ar rectangle drawing tools to shade in consumer surplus (Consumer surplus), if any, profit (Proht), if any, and deadweight loss (Dovdweight loss), if any Property label the shaded area(s). Carefully follow the instructions abowe, and only draw the required objects. D Price and MR Quantity
Consider a natural monopoly with declining average costs summarizedby the equation AC = 16/Q + 1, where AC is in dollars and Q is inmillions of units. (The total cost function is C = 16 + Q.) Demand forthe natural monopolist’s service is given by the inverse demand equationP = 11 - Q. a. Determine the price and output of the unregulated naturalmonopolist.b. Suppose a regulator institutes average-cost pricing. What is theappropriate price and quantity?c. Answer part (b) assuming the regulator institutes marginal-costpricing. What is the enterprise’s deficit per unit of output? How mightthis deficit be made up?
I need ans 3 In the next two problems, (1) and (2), consider a monopolist that maximizes profits and charges all consumers the same price. The inverse demand function is P = 100 – Q, where P is the price and Q is output. Calculate the deadweight loss to consumers (if any) and to the monopolist (if any). (1) Marginal cost is always zero. (2) Marginal cost is MC = Q. (3) Assume that every consumer has the inverse demand function P = 10 – Q and that marginal cost is always zero. There are 10 consumers. The monopolist wants to maximize profits by designing a two-part tariff. Calculate the two parts of the tariff, and calculate profits.