Microeconomics, Student Value Edition (6th Edition)
6th Edition
ISBN: 9780134125756
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 15, Problem 15.5.11PA
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3. Diagram illustrates your local electricity company’s natural monopoly. It shows the demand curve for kilowatt-hours (kWh) of electricity, the company’s marginal revenue (MR) curve, its marginal cost (MC) curve, and its average total cost (ATC) curve. The government wants to regulate the monopolist by imposing a price ceiling.
a) If the government does not regulate this monopolist, what price will it charge? Briefly explain: $ __________
b) If the government imposes a price ceiling equal to the marginal cost $0.20, will the monopolist make profits or lose money? Briefly explain.
c) If the government imposes $0.10 price ceiling, how much kWh will the firm produce? Briefly explain:
d) If the government imposes a price ceiling of $0.30, will the monopolist make a profit, lose money, or break even? Briefly explain:
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Chapter 15 Solutions
Microeconomics, Student Value Edition (6th Edition)
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 - Prob. 15.2.10PACh. 15 - Prob. 15.2.11PACh. 15 - Prob. 15.2.12PACh. 15 - Prob. 15.2.13PACh. 15 - Prob. 15.2.14PACh. 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. 15.4.8PACh. 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. 15.5.13PA
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- If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?arrow_forwardImagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?arrow_forwardWhat is a natural monopoly?arrow_forward
- Listen to “Google’s Mobile Monopoly" from NPR’s Planet Money podcast. (Link here:https://www.npr.org/sections/money/2018/07/23/631652230/google-s-mobile-monopoly ) Write ashort response (2-4 college-level sentences will do) to the following questions.a. How did Google deter smart phone operating system competitors from entering the market/drive competitors out of the market?b. Discuss how Google was able to use it’s position as a monopolist in the smart phone operating system market to its advantage in the mobile applications market. (Highlight theimportance of consumer inertia in your answer.)arrow_forwardDeBeers has a monopoly on the production of diamonds. Use the following graph showing the demand, MR and cost curves of DeBeers to answer the questions below. How many carats of diamonds does DeBeers produce to maximize its annual profit? What price does it charge? How much annual profit does it make? If DeBeers was producing at the allocatively efficient level of output, how many carats of diamonds would it produce? What price would it charge? Suppose that the government decided to regulate DeBeers monopoly and imposes a price ceiling of $50 per carat of diamonds. How many carats of diamonds would DeBeers produce? What price would it charge? What profit would it make?arrow_forwardThe following graph shows demand, MR, and cost curves for a monopoly in the short run: 12 11 SMC 10 ATC 8 AVC 2 1 10 20 30 40 50 60 70 80 90 100 110 120 Output MR a. Profit is maximized at a price of $– b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is $- and profit is $- total cost is $- d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P - ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal- ysis, explain why this happens. Price, marginal revenue, and cost (dollars)arrow_forward
- Suppose that Eric has a Magazine monopoly. The following table gives Eric's demand and costs per month for subscriptions to basic cable: Price Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost $27 3 $56 26 4 73 25 5 91 24 6 110 23 7 130 22 8 151 a. If Eric wants to maximize profits, what price should it charge, and how many Magazine subscriptions per month should it sell? How much profit will Eric make? Suppose the local government imposes a $45 per month tax on Magazine companies. b. What price should Eric now charge, and how many subscriptions should it sell? What will its profits be?arrow_forward-Briefly discuss what happens in the long run with respect to monopolist's total revenue. -Briefly explain how a natural monopoly arises.arrow_forwardWhat are the entry barriers to Monopoly? Using the case of an electricity company operating a power plant identify at least two and explain briefly.arrow_forward
- Briefly discuss how a monopolist can seek out the profit-maximizing quantity of outputarrow_forwardConsider the local telephone company, a natural monopoly. The following graph shows the demand curve for phone services, the company's marginal revenue curve (labeled MR), its marginal cost curve (labeled MC), and its average total cost curve (labeled AC). (Hint: Click a point on the graph to see its exact coordinates.) PRICE (Dollars per month) 160 140 120 100 80 60 40 20 0 0 1 MR 2 3 4 567 QUANTITY (Thousands of households per month) AC MC D 8 (?)arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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