MICROECONOMICS (CUSTOMIZED CHAPTERS + C
21st Edition
ISBN: 9781307215267
Author: McConnell
Publisher: MCG CUSTOM
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Question
Chapter 21, 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 21 Solutions
MICROECONOMICS (CUSTOMIZED CHAPTERS + C
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