Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.3.9PA
To determine
Setting price in Monopoly
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Figure: PPV
Price.
Costs, $100
Marginal 901
Revenue
80
70
60
50
40
30
20
10
0
MR
Quantity
(number of subscriptions)
(Ref 28-1 Figure: PPV) Use Figure 28-1: PPV. The figure shows the demand and marginal revenue for a pay-per-view football game on
cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much will it
produce?
a.8
b.4
c.6
d.2
Suppose a cable company provides cable service to a small town. The total revenue, marginal revenue, total cost, and marginal cost of providing various quantities of cable subscriptions (units in
thousands per month) are presented in the table below.
Quantity
0
1
2
3
4
5
6
Price
202
200
198
196
194
192
190
Total Revenue
$0
200
396
588
776
960
1140
Assume the local cable company is a monopoly. To maximize profits, the monopoly should produce
At that level of output, the cable company will earn economic profits of $
(thousand per month).
Marginal Revenue
200
196
192
188
184
180
Total Cost
0
180
270
330
420
660
960
Marginal Cost
180
90
60
90
240
300
(thousand) units. (Enter a numeric response using an integer.)
The figure to the right shows the market demand for electricity and the average total cost and
marginal cost of producing electricity for a utility company.
Suppose the utility company is a regulated natural monopoly. If government regulators want to
achieve economic efficiency, then they will regulate a price of $ per kilowatt hour. (Enter a
numeric response using a real number rounded to two decimal places)
Now suppose instead that government regulators want to eat the lowest price such that the utility
company will not suffer a loss so that it will continue to produce in the long run. If so, then i
government regulators will set a price of $ per kilowatt hour.
Price and cost (dollars per kilowatt hour)
0.52
048
044-
040-
0.36
0324
0.26
0.24
0.20
0.16
0.12
0.06
004
0.00+
ATC
MC
4
8 12 16 20 24 28 32 36 40 44 48
Quantity of kilowatt hours (in billions)
Chapter 15 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 15 - Prob. 15.1.1RQCh. 15 - Prob. 15.1.2RQCh. 15 - Prob. 15.1.3PACh. 15 - Prob. 15.1.4PACh. 15 - Prob. 15.1.5PACh. 15 - Prob. 15.1.6PACh. 15 - Prob. 15.2.1RQCh. 15 - Prob. 15.2.2RQCh. 15 - Prob. 15.2.3RQCh. 15 - Prob. 15.2.4RQ
Ch. 15 - Prob. 15.2.5PACh. 15 - Prob. 15.2.6PACh. 15 - Prob. 15.2.7PACh. 15 - Prob. 15.2.8PACh. 15 - Prob. 15.2.9PACh. 15 - (Related to the Apply the Concept an page 512) Why...Ch. 15 - Prob. 15.2.11PACh. 15 - Prob. 15.2.12PACh. 15 - Prob. 15.2.13PACh. 15 - Prob. 15.3.1RQCh. 15 - Prob. 15.3.2RQCh. 15 - Prob. 15.3.3RQCh. 15 - Prob. 15.3.4PACh. 15 - Prob. 15.3.5PACh. 15 - Prob. 15.3.6PACh. 15 - Prob. 15.3.7PACh. 15 - Prob. 15.3.8PACh. 15 - Prob. 15.3.9PACh. 15 - Prob. 15.3.10PACh. 15 - Prob. 15.4.1RQCh. 15 - Prob. 15.4.2RQCh. 15 - Prob. 15.4.3PACh. 15 - Prob. 15.4.4PACh. 15 - Prob. 15.4.5PACh. 15 - Prob. 15.4.6PACh. 15 - Prob. 15.4.7PACh. 15 - Prob. 15.5.1RQCh. 15 - Prob. 15.5.2RQCh. 15 - Prob. 15.5.3RQCh. 15 - Prob. 15.5.4PACh. 15 - Prob. 15.5.5PACh. 15 - Prob. 15.5.6PACh. 15 - Prob. 15.5.7PACh. 15 - Prob. 15.5.8PACh. 15 - Prob. 15.5.9PACh. 15 - Prob. 15.5.10PACh. 15 - Prob. 15.5.11PACh. 15 - Prob. 15.5.12PACh. 15 - Prob. 15.5.13PACh. 15 - Prob. 15.1CTECh. 15 - Prob. 15.2CTECh. 15 - Prob. 15.3CTE
Knowledge Booster
Similar questions
- Exercise 3.6. Why is there a social cost to monopoly power? If the gains to producers from monopoly power could be redistributed to consumers, would the social cost of monopoly power be eliminated? Explain briefly.arrow_forwardWhat are the four most important ways a firm becomes a monopoly? Will a monopoly that maximizes profit also be maximizing revenue? Will it be maximizing output? Explain. Assume the graph below represents the market for a monopolist. What quantity will the monopolist produce, and what price will she charge? What will her total revenue, costs, and profit be at this production level? What will the deadweight loss for society be at this level of production? (Assume the MC curve is a straight line between the relevant points for this calculation.)arrow_forwardWhen 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.arrow_forward
- Provide an example of a company that has a monopoly (could be a local monopoly).arrow_forwardSuppose that Comcast has a cable monopoly in Philadelphia. The following table gives Comcast's demand and costs per month for subscriptions to basic cable (for simplicity, we keep the number of subscribers artificially small). Total Revenue Marginal Revenue Marginal Total Price Quantity Cost Cost 68 3 204 144 64 4 256 52 172 28 60 5 300 44 204 32 56 336 36 240 36 52 7 364 28 280 40 48 8 384 20 324 44 Suppose the local government imposes a $97 per month tax on cable companies. What will Comcast do? (Assume fixed costs equal $60.) O A. Comcast should produce 6 units in the short run and shut down in the long run. B. Comcast should shut down in the short run and in the long run. c. Comcast should shut down in the short run and produce 6 units in the long run. D. Comcast should produce 6 units in the short run and in the long run. O E. None of the above. Suppose that the flat per-month tax is replaced with a tax on the firm of $16 per cable subscriber. (Assume that Comcast will sell only…arrow_forwardOn the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive outcome. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity t would be chosen if a monopolist controlled this market. Market Structure Price (Dollars) Quantity (Gyros) Competitive Monopoly Given the summary table of the two different market structures, you can infer that, in general, the price is lower under a and the quantity is lower under aarrow_forward
- On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive outcome. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Price (Dollars) Quantity (Gyros) Competitive Monopoly Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a and the quantity is lower under aarrow_forwardThe graph depicts the market for cable where there is one natural monopoly; AC represents average (total) cost, D represents market demand, and MR represents marginal revenue. Assume that the marginal cost is equal to 0. Suppose that before the cable company lays any cable, the government decides to regulate the monopoly by setting the price. What is the lowest price that regulators can impose while ensuring that the cable company enters the market? 2 What will a monopolist charge in the absence of any regulation? 4 Price $10 9 8 7 6 5 4- 3- تیا 2 1 0 1 AC 2 MR نیا D 4 5 6 7 8 9 10 Households (in millions)arrow_forwardWhat are the three (3) reasons that a market might have a monopoly? Give an example of a monopoly and explain the reason for it.arrow_forward
- Suppose a local cable company provides cable service to a rural community. The figure to the right illustrates the cable company's marginal cost of providing cable service along with the community's demand for cable TV. Assume the local cable company is a monopoly. When the company maximizes profits, consumer surplus equals $ 450 (enter a numeric response using a real number rounded to one decimal place), and producer surplus equals Price and cost (dollars per cable subscription) 120- 110- 100- 90- 80- 70- 60- 50- 40- 30- 20- 10- 0 10 20 30 MR 40 50 D 60 70 80 MC 90 100arrow_forwardSuppose a local cable company provides cable service to a rural community. The figure to the right illustrates the cable company's marginal cost of providing cable service along with the community's demand for cable TV. Assume the local cable company is a monopoly. When the company maximizes profits, consumer surplus equals $ (enter a numeric response using a real number rounded to one decimal place), and producer surplus equals $ Compared to the perfectly competitive market outcome, the cable company creates dead weight loss equal to $ Price and cost (dollars per cable subscription) 120- 110- 100- 90- 80- 70- 60- 50- 40- 30- 20- 10- to 10 20 MR D 30 40 50 60 70 80 Quantity of cable subscriptions MC 90 100 ONarrow_forwardnatural monopoly is of adding an additional customer is very low. An example of a With natural monopolies, because of one producer can serve the entire market more efficiently than a number of smaller producers. An example of a monopoly that arises due to control of physical resources is A gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time. In the United States, exclusive patent rights last for A trademark is an identifying symbol or name for a particular good, like Chiquita bananas. A "is a form of protection provided by the laws of the United States for 'original works of authorship’ including literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual creations." intellectual property. Taken together, we call the combination of patents, trademarks, copyrights, and Close Window Save and Submit Save All Answers Click Save and Submit to save and submit. Click Save…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning