omplete the first row of the following table. Short Run Quantity Price Pricing Mechanism (Subscriptions) (Dollars per subscription) Profit Long-Run Decision Profit Maximization Marginal Cost Pricing Average Cost Pricing uppose that the government forces the monopolist to set the price equal to marginal cost. omplete the second row of the previous table. uppose that the government forces the monopolist to set the price equal to average total cost. omplete the third row of the previous table. ue or False: Under the average cost pricing policy, the cable company has no incentive to cut costs. True False

Principles of Microeconomics (MindTap Course List)
8th Edition
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Author:N. Gregory Mankiw
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Chapter15: Monopoly
Section: Chapter Questions
Problem 1CQQ
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Complete the first row of the following 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.
True or False: Under the average cost pricing policy, the cable company has no incentive to cut costs.
O True
O False
Transcribed Image Text:Complete the first row of the following 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. True or False: Under the average cost pricing policy, the cable company has no incentive to cut costs. O True O False
7. Regulating a natural monopoly
Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company's
marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves.
100
90
80
70
60
ATC
A MC
10
MR
D
10
12
14
16
18
20
QUANTITY (Thousands of subscriptions)
Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits without constraints.
PRICE (Dollars per subscription
Transcribed Image Text:7. Regulating a natural monopoly Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. 100 90 80 70 60 ATC A MC 10 MR D 10 12 14 16 18 20 QUANTITY (Thousands of subscriptions) Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits without constraints. PRICE (Dollars per subscription
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