Figure: A Profit-Maximizing Monopoly Firm Price, marginal revenue, marginal cost, average total cost $35 ATC 29 MC 26 8 5 D. MR 160 220 250 300 Quantity of output (per week) Reference: Ref 14-2 The MR at the profit maximizing level of output A. is positive B. is $8 C. is less than the price D. All of the above E. Only A and B 2111

Figure: A Profit-Maximizing Monopoly Firm Price, marginal revenue, marginal cost, average total cost $35 ATC 29 MC 26 8 5 D. MR 160 220 250 300 Quantity of output (per week) Reference: Ref 14-2 The MR at the profit maximizing level of output A. is positive B. is $8 C. is less than the price D. All of the above E. Only A and B 2111

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter13: Monopoly And Antitrust

Section: Chapter Questions

Problem 7P

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Similar questions

From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?
How does the demand curve perceived by a monopolist compare with the market demand curve?
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
If public utilities are a natural monopoly, what would be the danger in deregulating them?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
If the transit system were allowed to operate as an unregulated monopoly, what output would it supply and what price would it charge?
Why are urban areas willing to subsidize urban transit systems? Does the argument for subsidies make sense to you?
If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?
If the transit system were regulated to operate with no subsidy (i.e., at zero economic profit), what approximate output would it supply and what approximate price would it charge?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly