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20 10 MRI 8 10 12 14 16 QUANTITY (Thousands of subscriptions) 18 20 Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the folowing table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local telephone company most likely do? Work to decrease its costs O Allow its costs to increase PRICE (Dollars per

20 10 MRI 8 10 12 14 16 QUANTITY (Thousands of subscriptions) 18 20 Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the folowing table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local telephone company most likely do? Work to decrease its costs O Allow its costs to increase PRICE (Dollars per

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter13: Monopoly And Antitrust
Section: Chapter Questions
Problem 6P
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20 10 MRI 8 10 12 14 16 QUANTITY (Thousands of subscriptions) 18 20 Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the folowing table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local telephone company most likely do? Work to decrease its costs O Allow its costs to increase PRICE (Dollars per
Transcribed Image Text:20 10 MRI 8 10 12 14 16 QUANTITY (Thousands of subscriptions) 18 20 Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the folowing table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local telephone company most likely do? Work to decrease its costs O Allow its costs to increase PRICE (Dollars per
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