Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 14, Problem 14.11P
a)
To determine
To know:
b)
To determine
Calculation of marginal and
c)
To determine
To calculate:Calculation of marginal and average cost from total cost.
d)
To determine
To plot:Graphical representation of average cost curve.
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Assume that the demand for electric cars is p = 100-q (where q is the quantity and p is the price), and that an innovation can reduce the constant marginal cost of production from 70 to 60.
What is the definition of nondrastic/drastic innovation?
Confirm that the innovation for electric cars is nondrastic.
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The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR)
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On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.
20
18
Monopoly Outcome
16
14
12
10
8
ATC
MC
MR
2
3
5
7
8
10
QUANTITY (Hundreds of cubic feet)
Which of the following statements are true about this natural monopoly? Check all that apply.
The gas company is experiencing economies of scale.
The gas company must own a scarce resource.
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 diseconomies of scale.
True or False: Without government regulation, natural monopolies always earn zero profit in the long run.
True
False
D.
2.
PRICE…
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If you were to do exercise 1 in for every marginal change in price, you would find the marginal revenue curve. The marginal revenue diagram has been provided for the next exercises, along with the marginal costs for DeBeers.
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