2. Consider a local utility company (Xcel Energy). a. In what ways is this company a natural monopoly? MR=MC b. Consider the cost structure and market demand for the Xcel Energy. Assume: I, there are high fixed costs of starting an energy company 2. the marginal cost per service sold is constant and fairly low 3. each consumer pays the same price for service-there are no differentiating package deals. Given the assumptions above, draw the cost structure (MC and ATC), demand and marginal revenue. c. State the profit maximization rule to determine the optimal quantity of output (electricity service) a monopolist will choose.
2. Consider a local utility company (Xcel Energy). a. In what ways is this company a natural monopoly? MR=MC b. Consider the cost structure and market demand for the Xcel Energy. Assume: I, there are high fixed costs of starting an energy company 2. the marginal cost per service sold is constant and fairly low 3. each consumer pays the same price for service-there are no differentiating package deals. Given the assumptions above, draw the cost structure (MC and ATC), demand and marginal revenue. c. State the profit maximization rule to determine the optimal quantity of output (electricity service) a monopolist will choose.
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter15: Monopoly
Section: Chapter Questions
Problem 7PA
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