Microeconomics with Connect Access Card
20th Edition
ISBN: 9781259278556
Author: Campbell McConnell
Publisher: McGraw-Hill Education
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Question
Chapter 19, Problem 4RQ
To determine
What happens when the government regulates an industry.
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Use the accompanying graph to answer the questions that follow. (LO1, LO2) a. Suppose this monopolist is unregulated. (1) What price will the firm charge to maximize its profits? (2) What is the level of consumer surplus at this price? b. Suppose the firmās price is regulated at $80. (1) What is the firmās marginal revenue if it produces 7 units? (2) If the firm is able to cover its variable costs at the regulated price, how much output will the firm produce in the short run to maximize its profits? (3) In the long run, how much output will this firm produce if the price remains regulated at $80?
6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5)
a. Determine the profit-maximizing output and price.
b. What price and output would prevail if this firmās product were sold by price-taking
firms in a perfectly competitive market?
c. Calculate the deadweight loss of this monopoly.
8. The elasticity of demand for a firmās product is ā2.5 and its advertising elasticity of demand is 0.2. (LO8)
a. Determine the firmās optimal advertising-to-sales ratio.
b. If the firmās revenues are $40,000, what is its profit-maximizing level of advertising?
As the manager of a monopoly, you face potential government regulation. Your inversedemand is P = 40 ā 2Q, and your costs are C(Q) = 8Q. (LO1, LO2, LO6)a. Determine the monopoly price and output.
Chapter 19 Solutions
Microeconomics with Connect Access Card
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- Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompaniesā total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.arrow_forwardSuppose we have another firm known as the Sanda Corporation which makes a product known as "Delgados". Suppose that its FC=$2,000 and its TC=$5,000 and its AVC=$48. What is the ATC? O $20.50 O $70 O $80 O $100 O Not enough informationarrow_forward5. Indicate whether each of the following statements is true or false, and explain your answer.A. If a monoplist is producing a level of output at which demand is inelastic, the firm is not maximizing profits and increasing output will decrease total revenu.B. When a monopolist maximizes profits, the price is greater than the marginal cost of producing the output. This means that consumers are willing to pay more for additional units of the product than these additional units of the produce. Thus, the monopolist should produce and sell addional units of output.C.A monopolistically competitive firm produces a level of output at which price equals $80, marginal revenue equals $40, average total cost equals $100, marginal cost equals $40 , and average fixed cost equals $10. To maximize profit, the firm should produce a smaller output and sell it at a higher price.D. In a monopolistically competitive market, a firm has market power because it produces a differentiated product. This meansā¦arrow_forward
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