ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 15, Problem 3P
A
To determine
The reason for considering the firm as a natural
B
To determine
In case of an unregulated firm, the
C
To determine
The price and output when the regulatory commission establishes a price with the aim of achieving
D
To determine
The price and output when the regulatory commission establishes a price with the aim of allowing from a normal profit and to determine the profits or losses of the firm.
E
To determine
From the prices already calculated in part b, c and d which prices maximizes the
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The McDonald's table shows information you found out about McDonald’s production capabilities and costs when operating as a monopoly. ( fill it out the table)
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9. Regulating a natural monopoly
Consider the only electric company in a small town, which you can assume operates as a natural monopoly. The following graph shows the
demand curve for electricity 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)
8
288 VR
10
QUANTITY (Thousands of subscriptions)
MR
Complete the first row of the following table.
Pricing Mechanism
Profit Maximization
Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in
maximizing profits.
Marginal-Cost Pricing
Average-Cost Pricing
ATC
MO
D
Short Run
Quantity
Price
(Subscriptions) (Dollars per subscription)
Profit
Long-Run Decision
19. A monopoly is a market in which there is only one seller. This situation hurts
consumers (buyers). But how, precisely? Explain the things that a monopoly does
that hurt consumers.
Chapter 15 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
Knowledge Booster
Similar questions
- In what sense is a natural monopoly natural?arrow_forwardWhat is cost-plus regulation?arrow_forwardIntellectual property laws are intended to promote innovation, but some economists, such as Milton Friedman, have argued that such laws are not desirable. In the United States, there is no intellectual property protection for food recipes or for fashion designs. Considering the state of these two industries, and hearing in mind the discussion of the inefficiency of monopolies, can you think of any reasons why intellectual property laws might hinder innovation in some cases?arrow_forward
- (Figure: Demand, Revenue, and Cost Curves for Thneeds) Use Figure: Demand, Revenue, and Cost Curves for Thneeds. Thneeds and Things is a monopolist in the thneed ("things we need") market. If the government wants to regulate Thneeds so that an efficient outcome is reached, it would impose a price ceiling of: Price of thneeds $100 90 $40. $46. $50. $65. 80 70 60 50 40 30 20 10 0 20 MR D MC ATC 60 100 140 180 220 Quantity of thneedsarrow_forward1. “Economics of Monopoly Power”Please respond to the following:From the first e-Activity, take a position on whether or not the current initiatives of the FCC encourage competition in all communication markets and protect the public. Provide specific examples to support your response.List and discuss three economic justifications for government regulation in your local area. Explain what happens if the government does not provide appropriate regulation. Determine the costs on society of government regulation.2. “Monopoly and Price Fixing”Please respond to the following:From the scenario, identify the possible illegal or unethical activities activities in which the print shop boss plans to engage in, and identify the consequences on society from an economic point of view. Explain whether or not you would have discussed these issues with the boss.From (1) a single product market perspective and (2) a natural monopolist market perspective, give your opinion on…arrow_forward1. A little town in the Midwest obtains all of its electricity from one company, Northstar Electric. Although the company is a natural monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. True or False? Explain. Feel free to draw a graph to illustrate your answer.arrow_forward
- Q5. The graph below represents a monopoly firm. Answer the questions below. ( a. Briefly explain three ways in which pricing can be set with a regulated monopoly and the intended objective of each pricing method.b. Based on the diagram, if this monopoly firm is unregulated, what will be its profit? Show your calculations.c. Based on the diagram, if this firm is regulated based on social interest theory, what will be its profit? Show and explain your calculations.d. Based on the diagram, if this monopoly is subject to rate of return regulation, what will be the new price, output and profit of the firm? Show your calculations with explanations.e. Based on the diagram, if this is a natural monopoly that is allowed to set its price, what will be the minimum it should set in order to make a profit or break even? Explain your answer.arrow_forwardSub : Economics ( Regulating a natural monopoly)Pls answer Fastt. i ll upvote. Thank Youarrow_forward9. Regulating a natural monopoly Consider the only electric company in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for electricity services per month, as well as the provider’s marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Complete the first row of the following table. Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Complete the first row of the following table. Pricing Mechanism Short Run Long-Run Decision Quantity Price Profit (Subscriptions) (Dollars per subscription) Profit Maximization Marginal-Cost Pricing Average-Cost Pricing…arrow_forward
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