Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization 13,000 65 Positive Stay in business Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local cable company most likely do? O Allow its costs to increase O work to decrease its costs
Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization 13,000 65 Positive Stay in business Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local cable company most likely do? O Allow its costs to increase O work to decrease its costs
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Regulating a natural monopoly
Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services, the company's marginal-revenue (MR), marginal cost (MC), and average-total-cost (ATC ) curves.
PLEASE CHECK THE IMAGES
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