Consider the only internet service provider in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for internet services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. PRICE (Dollars per subscription) 100 90 80 70 40 Comple 20 10 0 0 2 || 4 Pricing Mechanism Profit Maximization MR 8 10 12 14 QUANTITY (Thousands of subscriptions) Complete the first row of the following table. Marginal-Cost Pricing Average-Cost Pricing 16 Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. ATC -MC 18 20 the previoue table D Short Run Price Quantity (Subscriptions) (Dollars per subscription) Profit Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Long-Run Decision
Consider the only internet service provider in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for internet services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. PRICE (Dollars per subscription) 100 90 80 70 40 Comple 20 10 0 0 2 || 4 Pricing Mechanism Profit Maximization MR 8 10 12 14 QUANTITY (Thousands of subscriptions) Complete the first row of the following table. Marginal-Cost Pricing Average-Cost Pricing 16 Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. ATC -MC 18 20 the previoue table D Short Run Price Quantity (Subscriptions) (Dollars per subscription) Profit Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Long-Run Decision
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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