Concept explainers
The cause of the natural
Answer to Problem 1CQQ
Option ‘d’ is correct.
Explanation of Solution
Option (d):
Natural monopoly exists due to higher cost of production, and an increase in the output will decrease the
Option (a):
Under Natural monopoly, firms can control either the price or quantity to increase the sales. If firms increase the price, then there will be a fall in the output leading to a decrease in the marginal revenue. Thus, option ‘a’ is incorrect.
Option (b):
When the large firms maximize its output by increasing their quantity output, then the marginal cost decreases due to the benefits of economies of scale under monopoly. Thus, option ‘b’ is incorrect.
Option (c):
Under Natural monopoly, firms can control either the price or quantity which allows the firm to increase the average revenue by increasing the price. Thus, option ‘c’ is incorrect.
Concept introduction:
Monopoly: Monopoly is a market situation where a single firm exists with a large number of buyers without any available substitute.
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Chapter 14 Solutions
EBK ESSENTIALS OF ECONOMICS
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- Ron's Hamburger Place is the only restaurant in town, a monopoly Price and cost (dollars per hamburger) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 Price: $ [Select] ATC: $ [Select] 10 Profit: $ [Select] dan da MR MC Alt Text: Ron's Hamburger Place What is the profit maximizing output, price, and economic profit of Ron's Hamburgers, monopoly? Quantity: [Select] hamburgers per hour ATC 20 30 40 50 Quantity (hamburgers per hour) per hamburgerarrow_forward28. The following is a graph of a non-price discriminating monopoly in the short run. (a) What is the profit-maximizing level of output? (b) What is the economic profit? (c) What is the long- run equilibrium of this firm? £ P1 supernormal profit Q1 MR MC AC D=ARarrow_forwardCompare and contrast the decision-making processes of a competitive firm versus a monopoly firm. a. The difference between C and M markets in terms of the (homogeneity or uniqueness of product, barriers to enter and number of firms). b. You must point to the difference in the demand curve for a C firm and that for a M firm. c You must refer to the long run profit (or not) of the C as well as M firm. d. You must point to whether C and M firms are efficient or NOT. Graphs are welcome, not manadatory.arrow_forward
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