EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 10, Problem 8SP
To determine
Explain the
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An unregulated natural monopoly bottles Mt. McKinley air, unique clean air that has no substitutes. The
monopoly's total fixed cost is $30,000 a year and its marginal cost is 10 cents a can.
The graph illustrates the demand for Mt. McKinley air.
Draw the average total cost curve. Plot the four control points at the quantities 100,000, 200,000,
300,000, and 400,000. Label the curve.
Draw a point at the new quantity and price if the regulator sets a price cap such that the monopoly
breaks even.
The number of cans produced
sold
its marginal cost.
A. is; benefit; exceeds
B. is not; benefit; exceeds
OC. is not; revenue; is greater than
D. is; revenue; equals
the efficient quantity because the marginal
from the last can
60-
50-
40-
30-
20 20
10-
Price (cents per can)
0-
ATC
MC
D
$300
100
200 300 400
Quantity (thousands of cans per year)
>>> Draw only the objects specified in the question.
500
Blue INK is the only cabel service provider in Gazipur. The diagram below depicts the price, output and costs incurred by Blue INK. Use the graph to answer the following questions:
1. What is the Total revenue generated by Blue INK at the profit maximizing level of output?
2. If the Cable Service Market turns into a Perfectly Competitive Market, what will be the total ammount of the service provided?
3. If the market turns into a Monopoly market again, what will be the total deadweight loss created?
The graph below shows the Market conditions of Honey’s Laundry service, which is the only laundry in Arizon Residential Area. Considering the shop as a Monopoly market, answer the following questions:
(a)In order to maximize profit, how many clothes does the shop clean?[Answer in numerical value only without any unit]
(b)If the opening of five new laundries turns it into a perfectly competitive market, what should be the price Sunny’s laundry be charging now?[Answer in numerical value only without any unit]
(c)Compute the change in total revenue between part a and part b.[Answer in numerical value only without any unit]
Note: Bartleby does not accept more than 3 sub-parts, and here are no more than 3. Please solve all parts to get a 'like'. Thanks
Chapter 10 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- Raphael’s hair salon is a monopoly in a small town and is currently earning an economic profit. Draw a correctly labeled graph for Raphael and include the curves that are necessary to identify the following. The profit-maximizing price and quantity of haircuts, labeled Pm and Qm The area representing economic profits, shaded completely Does Raphael’s hair salon produce the allocatively efficient quantity? Explain. Assume that Raphael signs a new lease with an increase in rent, a fixed cost. Will the price of haircuts provided by Raphael increase, decrease, or stay the same in the short run? Explain. Assume that new hair salons enter the market and that the market becomes monopolistically competitive. Answer each of the following. The entry of new hair salons creates close substitutes for each individual salon’s services. As a result, will the demand for Raphael’s hair salon become more elastic or become less elastic, or will there be no change in the elasticity? Will…arrow_forwardWhat is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve? Please explain the difference in these markets by drawing the graphs.arrow_forwardThe graph below shows the Market conditions of Honey’s Laundry service, which is the only laundry in Banani Residential Area. Considering the shop as a Monopoly market, answer the following questions: (a)In order to maximize profit, how many clothes does the shop clean ? (b)If the opening of five new laundry turns it into a perfectly competitive market, what should be the price Sunny’s laundry be charging now? (c)Compute the change in total revenue between part a and part b.arrow_forward
- Suppose a monopoly is producing at its profit-maximising (loss-minimizing) quantity, and the price corresponding to this quantity is below average total cost but above average variable cost. The monopoly will shut down in the short run but return to production in the long run shut down in the short run and exit the market in the long run keep producing both in the short run and in the long run keep producing in the short run but exit the market in the long run None of the above.arrow_forwardThe graph illustrates an industry in which many firms operating in perfect competition are taken over by one firm that operates as a single-price monopoly. Draw the following shapes: 1) the consumer surplus arising from monopoly. Label it CS. 2) the deadweight loss arising from monopoly. Label it DWL 3) the loss of consumer surplus that is a gain to the monopoly as producer surplus. Label it Monopoly's gain. Indicate whether each of the following statements is true or false. At the competitive equilibrium, marginal social benefit equals marginal social cost. At the competitive equilibrium, the sum of consumer surplus and producer surplus is maximized. At the long-run competitive equilibrium, firms produce at the lowest possible long-run average cost. 30- 25- 20 15- 10- 5- Price and cost (dollars per haircut) 0+ 0.0 MR 1.0 2.0 3.0 4.0 Quantity (thousands of haircuts) MSC 5.0arrow_forwardUse the cost and revenue data to answer the questions. Quantity Price Total Revenue Total Cost 10 90 15 80 20 70 25 60 30 50 35 40 900 1200 1400 1500 1500 1400 675 825 1025 1250 1500 1850 What is marginal revenue when quantity is 25? What is marginal cost when quantity is 15? If this firm is a monopoly, at what quantity will profit be maximized? If this is a perfectly competitive market, which quantity will be produced? $ 20 $ 90 Incorrect quantity: 6 Incorrect quantity: 8 Incorrectarrow_forward
- Assume there is no price discrimination: Matthew, Rachel, Janice, and Mandy own the only ice company in town (they have a monopoly on the ice market). Matthew wants to sell as much ice as possible without losing money. Rachel wants the ice company to bring in as much revenue as possible. Janice wants to maximize total surplus and Many wants to make the largest possible profit. Use ONE clearly-labelled graph of the ice company’s marginal revenue, demand, and cost curves to show the price and quantity (i.e., ice) each person desires. Provide explanation.arrow_forward26. The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, compared to a monopoly who charges a single price, the change in producer surplus is A) B + D.B) A.C) A + C + E.D) B + C + D + E. 27. The above figure shows the market for a particular good. If the market is controlled by a perfect-price-discriminating monopoly, compared to a perfectly competitive market, the change in producer surplus is A) B + C.B) D + E.C) A + B + C.D) A + B + C + D + E.arrow_forwardssume there is no price discrimination: Matthew, Rachel, Janice, and Mandy own the only ice company in town (they have a monopoly on the ice market). Matthew wants to sell as much ice as possible without losing money. Rachel wants the ice company to bring in as much revenue as possible. Janice wants to maximize total surplus and Many wants to make the largest possible profit. Use ONE clearly-labelled graph of the ice company’s marginal revenue, demand, and cost curves to show the price and quantity (i.e., ice) each person desires. Provide explanation.arrow_forward
- Village is an isolated community served by one newspaper that can meet the market demand at a lower cost than two or more newspapers could. The Village Examiner is the only source of news. The graph shows the marginal cost of printing the newspaper and the market demand for it. The firm is a profit-maximizing, single-price monopoly. Draw the marginal revenue curve. Label it. 100- 80- 60- Draw a point at the profit-maximizing output and price. print the efficient the marginal cost of 40- This single-price monopoly. quantity because the marginal the last copy printed. A. does; benefit from the last copy printed exceeds B. does not; benefit from the last copy printed is less than C. does not; benefit from the last copy printed exceeds D. does; revenue from the last copy printed equals 20- Price and cost (cents per newspaper) 0- 0 100 MC 200 300 D 400 500 600 Quantity (newspapers per day) >>> Draw only the objects specified in the question.arrow_forwardThe accompanying diagram shows demand and long-run cost conditions in a price-searcher market with high barriers to entry. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity. Then, use the gray rectangle (star symbols) to shade the area corresponding to the profit or losses in this industry. PRICE 6 7 5 2 1 0 MC 0 1 2 3 LRATO MR QUANTITY 5 6 7 D 8 Monopoly Outcome Profit or Loss Which of the following would best describe why an industry is likely to be monopolized? O The marginal cost curve intersects the demand curve at the profit-maximizing quantity.arrow_forward
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