Question 25.25.   a.) What is the relationship between economies of scale and a natural monopoly?  b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output?

Question 4

The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per hundred cubic feet) 9 36 32 28 24 20 16 12 0 MR 2 3 5 6 7 a QUANTITY (Hundreds of cubic feet) ATC MO 10 + Monopoly Outcome

Question 1

When selling downloadable software, e-books, and music streaming platforms, the marginal cost of making one more unit is basically zero. The average total cost is currently $1 per book. If a monopoly is operating in this market and is maximizing profits, marginal revenue is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Greater than $0 Less than $0 $0 d $1 e There is not enough information to answer this question.

Suppose the market for asparagus has the following (inverse) market demand schedule: p=88-0.2Q The industry has the following cost structure: MC = ATC = $4 The Amalgamated Asparagus Company is looking to spend factor resources in socially-wasteful legal battles and advertising campaigns to maintain a full monopoly in this market. Answer the following. a. For its monopoly, Amalgamated Asparagus is willing to pay resources worth up to $14070 Suppose that competitive rent-seeking pressures cause Amalgamated Asparagus to pay its maximum willingness-to-pay for monopoly rights. b. Social cost of this monopoly = $ 4410 Hint: Your answer to (a) should be whole number. Think about why.

Question 25.25.  a.) What is the relationship between economies of scale and a natural monopoly?  b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output?

3. MUSEUM MONOPOLY MATH Once the museum has incurred the basic operating cost of 60 to open for the day, the average variable cost (and marginal cost) of serving each visitor is only 2. In other words, the museum's total daily operating cost function is DOC[Q] = 60 + 2Q, where Q is the number of visitors. Meanwhile, the inverse demand function for museum admission is P[Q] = 34 - Q. TIP: We used "average daily operating cost" instead of average total cost when discussing museums. a) If this museum were a commercial, profit-maximizing enterprise, then find its profit. TIP: You'll need to find Q* and P*. Even though you could answer this with a well-drawn graph, show that you can "do the math” to find the correct answer. TIP: This may sound familiar. What did you learn about drawing this graph? ☺ b) Suppose the museum manager set the price at 28, which is not the profit-maximizing price. Find its profit. For the remainder of the problem, suppose that the museum is instead a nonprofit…

You are the owner of a monopoly firm. The demand curve that you face is: 100 0. 5Q - Your Total Cost and Marginal Cost are: 1035 +10Q +0. 5Q2 10 +Q TC |3| MC The government decides to regulate your firm and imposes the Efficient Price. What is the price you must set? Regulated Efficient price $77.5 Regulated Efficient price = $55 Regulated Efficient price = $60 Regulated Efficient Price = $70

Question 2