2. Andrew is a monopolist whose production process exhibits economies of scalE (a) Draw a diagram illustrating Andrew's profit-maximizing price and quantity. Or your diagram, identify the deadweight loss of monopoly. (b) The government is concerned that Andrew is charging too high a price and plans to regulate the price. Htustrate the price regulation you would recommend on your diagram and explain your recommendation. (c) What is the maximum amount of money Andrew would be willing to spend lob- bying the government to avoid the price regulation you identified in (b)?

2. Andrew is a monopolist whose production process exhibits economies of scalE (a) Draw a diagram illustrating Andrew's profit-maximizing price and quantity. Or your diagram, identify the deadweight loss of monopoly. (b) The government is concerned that Andrew is charging too high a price and plans to regulate the price. Htustrate the price regulation you would recommend on your diagram and explain your recommendation. (c) What is the maximum amount of money Andrew would be willing to spend lob- bying the government to avoid the price regulation you identified in (b)?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 29CTQ: Imagine that you ale managing a small firm and thinking about entering the market of a monopolist....

See similar textbooks

Similar questions

Why are urban areas willing to subsidize urban transit systems? Does the argument for subsidies make sense to you?
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?
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?
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.)
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive film?
How does the demand curve perceived by a monopolist compare with the market demand curve?
If public utilities are a natural monopoly, what would be the danger in deregulating them?
If the transit system were regulated to operate with no subsidy (i.e., at zero economic profit), what approximate output would it supply and what approximate price would it charge?
What is a legal monopoly?