Assume that Hydro One is the sole electricity distributor in Ontario, i.e. the market for distributing electricity is an actual monopoly. The demand of electricity is given by P = 250,000 – 3Q where Q the quantity is measured in Gigawatt-hour (GWh). The price is measured in dollars per GWh. The total cost of Hydro One is given by: Cost = + 90,000Q + 1,500,000,000 100 a. Distinguish between natural and legal monopolies. Is Hydro One legal or natural monopoly? Explain your answer. b. Draw the marginal revenue curve for Hydro One. c. Determine the profit maximizing level of output for Hydro One.

Assume that Hydro One is the sole electricity distributor in Ontario, i.e. the market for distributing electricity is an actual monopoly. The demand of electricity is given by P = 250,000 – 3Q where Q the quantity is measured in Gigawatt-hour (GWh). The price is measured in dollars per GWh. The total cost of Hydro One is given by: Cost = + 90,000Q + 1,500,000,000 100 a. Distinguish between natural and legal monopolies. Is Hydro One legal or natural monopoly? Explain your answer. b. Draw the marginal revenue curve for Hydro One. c. Determine the profit maximizing level of output for Hydro One.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 8E

See similar textbooks

Similar questions

The Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500-500Q where QQ is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are $ per computer and million computers, respectively. The total contribution to profits and fixed costs at this output level is $ million. Time Period Price Units sold Total Contri. 1 2,400 2 2,200 3 2,000 4 1,800 5 1,700 6 1,600 7 1,500 8 1,400 9 1,300 10 1,200 Over the 10 periods, the total contribution to profits and fixed costs from price skimming is $…
he Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500−500Q�=2,500−500� where Q� is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are per computer and million computers, respectively. The total contribution to profits and fixed costs at this output level is million. Pear Computer is considering an alternative pricing strategy of price skimming. It plans to set the following schedule of prices over the coming two years: Complete the following table by calculating the contribution to profit and overhead for each of the 10 time periods and prices. Time Period Price Quantity Sold Total Contribution ($) (Million)…
The cost function for producing ethanol from municipal waste (wastehol) is 1000+10q2 where q is in millions/gallons per year. The demand for wastehol is currently perfectly inelastic at 5 million gallons per year. Assume that producers of wastehol are perfectly competitive. California is deciding whether to convert all wastehol producers into a regulated wastehol utility. If wastehol is a regulated monopoly utility with the cost function above, what price would regulators set as the price of wastehol? Now assume that the wasteahol market has boomed and demand has grown to 20 (again million gallons per year). Now what is the regulated price of wastehol? You are the wastehol producer and are trying to decide whther to lobby for deregulating the wastehol industry. If wastehol were deregulated, if demand remains 20, what would the perfectly competitive price be? If you are a wastehol customer, you would prefer a deregulated industry if demand were 20? True/False?
Under patent protection, a firm has a monopoly in its production. Market demand is estimated to be P = 600 – 0.3Q. The firm’s economic costs are given by ATC = MC = $60 per unit. Determine the firm’s optimal output, price and economic profit After the firm’s patent expires, predict the new market output and price under perfect competition. Assume that competing suppliers have the same economic costs as the original producer. What is the new market price, quantity, and total industry profit? Compute the resulting change in consumer surplus Compute the resulting change in producer surplus.
Under patent protection, a firm has a monopoly in its production. Market demand is estimated to be P = 400 – 0.2Q. The firm’s economic costs are given by ATC = MC = $80 per unit. Determine the firm’s optimal output, price and economic profit.
Novartis produces a unique kind of test strips for measuring blood sugar level and has a monopoly in the market. The company is is approved by the European Union to market its product separately in Northern Europe and Southern Europe. The inverse demand function in Northern Europe is given by PN = 59 - 1.5QN and the inverse demand function in Southern Europe is given by PS = 45 - 2QS. Therefore the total revenue function for Northern Europe is given by TRN = 59QN - 1.5QN2 and the total revenue function for Southern Europe is given by TRS = 45QS - 2QS2 . Test strips are sold in a pack of 30 strips and the marginal cost of producing each pack is 5 Euros. PN = Price in Northern Europe in Euros; PS = Price in Southern Europe in Euros; QN = Quantity sold in Northern Europe; QS = Quantity sold in Southern Europe. What will be the profit from the Southern European Market? a. 0.00 Euro b. 198.00 Euro c. 72.00 Euro d. 200.00 Euro
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 50 - 0.25P, and the marginal cost of production is $120. Determine the optimal number of units to put in a package. How much should the firm charge for this package?
A pure monopoly sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sold output increases by _____. rev: 05_15_2018
Under patent protection, a firm has a monopoly in its production. Market demand is estimated to be P = 400 – 0.2Q. The firm’s economic costs are given by ATC = MC = $80 per unit. After the firm’s patent expires, predict the new market output and price under perfect competition. Assume that competing suppliers have the same economic costs as the original producer. What is the new market price, quantity, and total industry profit?
Under patent protection, a firm has a monopoly in the production of a high-tech component. Market demand is estimated to be P = 100 – 0.2Q. The firm’s economic costs are given by AC = MC = €60 per component. a) Determine the firm’s output, price and profit. b) After the firm’s patent expires, and assuming that there is no other barrier to entry, predict the new market output, price and individual economic profit. c) Compute the change in consumer surplus resulting from the chasing patent protection. Calculate the net welfare gain after the patent’s expiration. Assume that competing suppliers have the same economic costs as the original producer.
You are the manager of a monopoly, and your analysts have estimated your demand and cost functions as P = 300-2Q and C(Q) = 1,500 + 2Q2, respectively. a. What price-quantity combination maximizes your firm's profits? Instructions: Round your response to the nearest penny (two decimal places). Price: $ Quantity: units b. Calculate the maximum profits. Instructions: Round your response to the nearest penny (two decimal places). $ c. Is demand elastic, inelastic, or unit elastic at the profit - maximizing price-quantity combination? multiple choice 1 Unit elastic Elastic Inelastic d. What price- quantity combination maximizes revenue? Instructions: Round your response to the nearest penny (two decimal places). Price: $ Quantity: units e. Calculate the maximum revenues. Instructions: Round your response to the nearest penny (two decimal places). $ f. Is demand elastic, inelastic, or unit elastic at the revenue - maximizing price-quantity combination? multiple choice 2 Unit elastic Elastic…
We are currently the only supplier of restaurant/hospitality ice machines in the Midwest Region. Having a monopoly in the market, we have enjoyed strong profits from this market. Our current inverse demand function for our ice machines is P = 3,000 – 5Q and our costs are TC = 150,000 + 100Q. Our current price for an ice machine is $1,400 and we are typically selling 320 machines per year. Our current profits are exceeding $265,000. We are interested in knowing if we are currently optimizing our monopoly profits at a price of $1,400. I have suggested to my colleagues that we could increase price and realize greater profits. Given our success in the Midwest Region, we have learned that a competitor BSW Ice is potentially planning to enter the Midwest market. If they do enter, we may have to change our pricing strategy as we will lose our monopoly power and need to compete with BSW Ice as a Cournot Duopoly. To avoid this potential competition, I have suggested to our CEO that we…