Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 13, Problem 9SQP
To determine
Explain the favorable condition for the existing firm in the market.
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Students have asked these similar questions
Are monopolies economically efficient?
Consider the market to the right. Compared to the perfectly competitive outcome,
what would be the change in surplus if instead the market had one supplier that was
a monopoly?
Use the triangle drawing tool to shade in the change in surplus. Properly label this
shaded area.
Carefully follow the instructions above, and only draw the required objects.
Price and cost per unit
40-
36-
32-
28-
24-
20-
16-
12-
8-
4-
0-
4
8
MR
D
16 20 24
Quantity
12
28
MC
32 36
40
Q
35. Consider a publicly owned nondiscriminating monopoly whose marginal cost is
10, whose average cost is 10 +90/Q, and whose demand curve is P = 100 –-Q,
where P is price and Q is quantity. The government instructs the firm to
produce a quantity such that MC = P. Which of the following statements is
true?
%3D
(a) The firm makes a profit of 90
(b) The firm breaks even
(c) The firm requires a subsidy of 90
(d) The firm makes a profit of 100
(e) The firm requires a subsidy of 100
In some regulated industries, regulatory agencies pre-vented prices from falling, and as a result many firms opened for business in those industries. Is this kind of regulation competitive or anticompetitive? Is it a good idea or a bad one?
Chapter 13 Solutions
Micro Economics For Today
Ch. 13.2 - Prob. 1YTECh. 13.6 - Prob. 1.1YTECh. 13.6 - Prob. 1.2YTECh. 13 - Prob. 1SQPCh. 13 - Prob. 2SQPCh. 13 - Prob. 3SQPCh. 13 - Prob. 4SQPCh. 13 - Prob. 5SQPCh. 13 - Prob. 6SQPCh. 13 - Prob. 7SQP
Ch. 13 - Prob. 8SQPCh. 13 - Prob. 9SQPCh. 13 - Prob. 10SQPCh. 13 - Prob. 11SQPCh. 13 - Prob. 12SQPCh. 13 - Prob. 1SQCh. 13 - Prob. 2SQCh. 13 - Prob. 3SQCh. 13 - Prob. 4SQCh. 13 - Prob. 5SQCh. 13 - Prob. 6SQCh. 13 - Prob. 7SQCh. 13 - Prob. 8SQCh. 13 - Prob. 9SQCh. 13 - Prob. 10SQCh. 13 - Prob. 11SQCh. 13 - Prob. 12SQCh. 13 - Prob. 13SQCh. 13 - Prob. 14SQCh. 13 - Prob. 15SQCh. 13 - Prob. 16SQCh. 13 - Prob. 17SQCh. 13 - Prob. 18SQCh. 13 - Prob. 19SQCh. 13 - Prob. 20SQ
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- The government has announced its plans to license two firms to serve a market whose demand curve is given by P= 72-1Q The technology is such that each can produce any given level of output at zero cost, but once each firm's output is chosen, it cannot be altered. Instructions: Round your answers to the nearest penny (2 decimal places). a. What is the most you would be willing to pay for one of these licenses if you knew you would be able to choose your level of output first (assuming your choice was observable by the rival firm)? Skipped b. How much would your ival be willing to pay for the right to choose second?arrow_forwardWhy does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers?arrow_forwardExplain verbally and graphically how price (rate) regulation may improve the performance of monopolies. In your answer distinguish between (a) socially optimal (marginal cost) pricing and ( b) fair-return (average-total-cost) pricing. What is the “dilemma of regulation”?arrow_forward
- Answer parts a-c plz total cost= 100+2q2 marginal cost = 4q market demand curve = 90-2q monopolist’s marginal revenue curve = 90-4q Part a) What is the quantity, profit, and price of the monopoly? Part b) Assuming a competetive industry, what is quanity, price, and profit? (P=MC can be used for perfect competition) Part c) What is the price elasticity of demand at the monopoly price and quantity? What does this mean in context?arrow_forwardSuppose regulators are deciding how the local electric company is allowed to set prices. Demand for electricity is given by P = 40-Q, where Q is millions of megawatt hours demanded annually. The electric company is allowed to operate as a monopoly. The marginal cost of the company is $2, while the fixed cost is $150 million annually. (a) If the price of the electric company was not regulated, what price would it set? What would be its profits and the deadweight loss? (b) Knowing the fixed cost, demand curve, and marginal cost of the utility, the regulator decides to set a linear price that allows the electric utility to break even. What is this price? What would be the deadweight loss? (c) Suppose that demand for electricity varies over the course of the day and is most inelastic in the middle of the day. Illustrate how the regulator could use this information to improve on the outcome in (b)? Would there be any challenges that would prevent regulators from using the prices you…arrow_forwardFigure 15-16 shows the market demand and cost curves facing a natural monopoly.Refer to Figure 15-16. Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit maximizing owners. If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged? Q3 units; P3 Q1 units; P1 Q4 units; P4 Q1 units; P4 Suivantarrow_forward
- Identify and explain the economic principles and difficulties relating to the setting of prices (rates) charged by so-called natural monopolies.arrow_forwardConsider 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 ?arrow_forwardThe figure below represents the cost and demand curves for a natural monopoly that is regulated using a marginal cost pricing rule. Identify the area in the graph above that represents consumer surplus when the firm is regulated using marginal cost pricing? What would happen to the consumer surplus if the government decide to set a fair return price?arrow_forward
- Discuss the forms of barriers to entry in the pharmaceutical industry.arrow_forwardPlease find the answer to this problemarrow_forwardOur textbook discusses two methods of regulating natural monopolies. One of them is price cap regulation. One of the following answers is an example of price cap regulation. Which one? Group of answer choices A government setting the price that a cable company can charge over a period of time by looking at the cable company's accounting costs and then adding a normal rate of profit. A government setting a price level for a public utility several years in advance. When a regulated public utility plays a large role in setting up the regulations that they will follow. When a firm no longer is considered a natural monopoly because of decreased demand.arrow_forward
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