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The Mobile Phone Company has served Mobile, Alabama, since the 1930s as a government-authorized natural monopoly. The following table describes a portion of the demand curve for long-distance service facing Mobile Phone Company. a. Complete the table. b. How does the company's marginal revenue change as the price changes? What is the relationship between marginal revenue and price? c. At what price does demand become inelastic? d. What will happen to the elasticity of demand when a new company. Mobile Phones of Mobile starts a competing wireless phone company?

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Exploring Economics

8th Edition
Robert L. Sexton
Publisher: SAGE Publications, Inc
ISBN: 9781544336329

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Chapter
Section
BuyFindarrow_forward

Exploring Economics

8th Edition
Robert L. Sexton
Publisher: SAGE Publications, Inc
ISBN: 9781544336329
Chapter 13, Problem 6P
Textbook Problem
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The Mobile Phone Company has served Mobile, Alabama, since the 1930s as a government-authorized natural monopoly. The following table describes a portion of the demand curve for long-distance service facing Mobile Phone Company.

Chapter 13, Problem 6P, The Mobile Phone Company has served Mobile, Alabama, since the 1930s as a government-authorized , example  1Chapter 13, Problem 6P, The Mobile Phone Company has served Mobile, Alabama, since the 1930s as a government-authorized , example  2

a. Complete the table.

b. How does the company's marginal revenue change as the price changes? What is the relationship between marginal revenue and price?

c. At what price does demand become inelastic?

d. What will happen to the elasticity of demand when a new company. Mobile Phones of Mobile starts a competing wireless phone company?

To determine

(a)

To compute:

The various values in the table.

Explanation of Solution

The values are as shown in the table below:

    QuantityPriceTRMRElastic or Inelastic
    303.65109.50Elastic
    313.58110.981.48Elastic
    323.51121.02Elastic
    333.43113.191.19Elastic
    343.35113.90.71Elastic
    353.27114.450.55Elastic
    363.2115.20.75Elastic
    373.12115.440.24Elastic
    383.05115.90.46Elastic
    392.97115.83-0...
To determine

(b)

To explain:

The way company's MR changes as price changes and also describe the relationship between MR and price.

To determine

(c)

To compute:

The prices at which demand becomes inelastic.

To determine

(d)

To explain:

The changes in elasticity of demand when a new company enters into the market.

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