EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
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Chapter 11, Problem 2TY
To determine
Calculate the profit of a
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The following are the demand and total cost schedules for Company Town Water, a local monopoly:
How much output will Company Town Water produce and what price will it charge? Will it earn a profit? How much? (First compute the firms MR and MC schedules)
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for phone services, the company's marginal
revenue curve (labeled MR), its marginal cost curve (labeled MC), and its average total cost curve (labeled AC). (Hint: Click a point on the graph to
see its exact coordinates.)
PRICE (Dollars per month)
160
140
120
100
80
60
40
20
0
0
1
MR
2
3
4
567
QUANTITY (Thousands of households per month)
AC
MC
D
8
(?)
The figure to the right shows the market demand for electricity and the average total cost and
marginal cost of producing electricity for a utility company.
Suppose the utility company is a regulated natural monopoly. If government regulators want to
achieve economic efficiency, then they will regulate a price of $ per kilowatt hour. (Enter a
numeric response using a real number rounded to two decimal places)
Now suppose instead that government regulators want to eat the lowest price such that the utility
company will not suffer a loss so that it will continue to produce in the long run. If so, then i
government regulators will set a price of $ per kilowatt hour.
Price and cost (dollars per kilowatt hour)
0.52
048
044-
040-
0.36
0324
0.26
0.24
0.20
0.16
0.12
0.06
004
0.00+
ATC
MC
4
8 12 16 20 24 28 32 36 40 44 48
Quantity of kilowatt hours (in billions)
Chapter 11 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- Is a monopoly always undesirable? Support your answer with a diagram.（Please write clearly. Thank you !）arrow_forwardSacramento Gas and Electric is a firm that represents a natural monopoly. Assume that there will be two new firms with similar economic scale or size joining the market. So, do your research and discuss the following questions: What would happen to the price of gas & electricity in Sacramento? Do the sacramento residents better off or worse off as a result?arrow_forwardSuppose the graph on the right (which is taken from the "Botox Revisited" application in the text) represents a single price monopoly. If they could become a perfectly price-discriminating monopoly, how much producer surplus can they gain? By perfectly price discriminating, this company could gain $enter your response here million per year. (Round your answer to the nearestmillion.) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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