12. Regulation of a Natural Monopoly For a decreasing-cost industry natural monopoly (LRAC negatively sloped), one firm can supply the market at a lower total cost than can two or more firms. Regulators may regulate the price charged by the firm rather than force it to break up. In this exercise, you will find output, price, profit, and consumer surplus for a utility (say, an electricity provider) under three different pricing rules. The market demand equation is: P = 50 – 0.1Q The long run total cost equation is: TC = 3000 + 10Q a. Write the marginal revenue, marginal cost, and average cost equations. Confirm that the average cost curve is negatively sloped. MR = MC = AC = Slope of AC = dAC/dQ = b. GRAPH the demand, marginal revenue, marginal cost, and average cost curves. 100 200 300 400 500

12. Regulation of a Natural Monopoly For a decreasing-cost industry natural monopoly (LRAC negatively sloped), one firm can supply the market at a lower total cost than can two or more firms. Regulators may regulate the price charged by the firm rather than force it to break up. In this exercise, you will find output, price, profit, and consumer surplus for a utility (say, an electricity provider) under three different pricing rules. The market demand equation is: P = 50 – 0.1Q The long run total cost equation is: TC = 3000 + 10Q a. Write the marginal revenue, marginal cost, and average cost equations. Confirm that the average cost curve is negatively sloped. MR = MC = AC = Slope of AC = dAC/dQ = b. GRAPH the demand, marginal revenue, marginal cost, and average cost curves. 100 200 300 400 500

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter15: Economic Regulation And Antitrust Policy

Section: Chapter Questions

Problem 10PAE

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Similar questions

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