EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Chapter 27, Problem eFCT
To determine
Impact of Justice Department’s policy action.
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The figure below represents the cost and demand curves for a natural monopoly that is regulated using a marginal cost pricing rule.
Identify the area in the graph above that represents consumer surplus when the firm is regulated using marginal cost pricing? What would happen to the consumer surplus if the government decide to set a fair return price?
Assume that a monopoly is
constrained to charging the same
price for each unit it sells, and
assumption BIG holds. It faces a
demand curve equal to MWTP(Q) =
160 - 0.5Q, and MC(Q) = 60. What
is the monopoly's producer surplus
if a regulator directs it to sell the
efficient quantity?
Round to two decimal places, do
not include a currency symbol, and
enter the negative sign if the
answer is negative. If your answer is
-$1.275, enter -1.28.
Chapter 27 Solutions
EBK ECONOMICS TODAY
Ch. 27 - Prob. 27.1LOCh. 27 - Prob. 27.2LOCh. 27 - Prob. 27.3LOCh. 27 - Prob. 27.4LOCh. 27 - Prob. 27.5LOCh. 27 - Prob. 27.6LOCh. 27 - Prob. aFCTCh. 27 - Prob. bFCTCh. 27 - Prob. cFCTCh. 27 - Prob. dFCT
Ch. 27 - Prob. eFCTCh. 27 - Prob. 1CTQCh. 27 - Prob. 2CTQCh. 27 - Prob. 1FCTCh. 27 - Prob. 2FCTCh. 27 - Prob. 1PCh. 27 - Prob. 2PCh. 27 - Prob. 3PCh. 27 - Prob. 4PCh. 27 - Prob. 5PCh. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Prob. 9PCh. 27 - Prob. 10PCh. 27 - Prob. 11PCh. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - Prob. 14PCh. 27 - Prob. 15PCh. 27 - Prob. 16P
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- part C Darrow_forwardii. A monopoly faces the marginal cost schedule MC = 1.1 + 0.01q and can price- discriminate between the two markets where Pi = 10 – 0.1q1 and p2 = 6 – 0.04q2 How much should it sell in each market to maximize profit, and at what prices?arrow_forwardThe figure below represents the demand and cost functions facing a Belarusian monopolist producing mineral fertilizer. 1) If it were unable to export, and was constrained by its domestic market, what quantity would it sell at what price? 2) How much is the international price and what quantity is produced? 3) The Belarusian firm is charging its foreign (Russian) customers one half the price it is charging its domestic customers. Is this good or bad for the real income or economic welfare of Russia? 4) Is this predatory behavior on the part of the Belarusian mineral fertilizer company? Is the Belarusian firm engaged in dumping? Please explain Dumping by Monopolist Price 20 MC 16 Dfor = MRfor 10 Ddom MRdom Quantity 10 20arrow_forward
- 24 $70 $60 i of $50 $40 $30 $20 -LRATC = LRMC $10 Demand = P MR $0 50 100 150 200 250 Output (Q) The diagram above shows the demand and cost curves for a market that could either be a monopoly or perfectly competitive in Long- Run Equilibrium. If the market above were a monopoly, the monopolist would earn in Total Profit (Producer Surplus) in the Long-Run. Select one: а. zero b. $2,500 c. $1,000 d. $2,000arrow_forwardSuppose a local cable company provides cable service to a rural community. The figure to the right illustrates the cable company's marginal cost of providing cable service along with the community's demand for cable TV. Assume the local cable company is a monopoly. When the company maximizes profits, consumer surplus equals $ 450 (enter a numeric response using a real number rounded to one decimal place), and producer surplus equals Price and cost (dollars per cable subscription) 120- 110- 100- 90- 80- 70- 60- 50- 40- 30- 20- 10- 0 10 20 30 MR 40 50 D 60 70 80 MC 90 100arrow_forwardc) Discuss various ways in which government policymakers might respond to the problems of monopoly.arrow_forward
- 2. A firm is a monopolist in a market. The demand curve for the product is given by P = 20 – 2Q. Recall that for a demand function given by P = a – bQ, marginal revenue is given by MR= a – 26Q. (a) Using only the information given above, what is the lowest possible price the monopolist will choose? Show your work and explain your answer, illustrating your answer with a graph of the demand curve. (b) Now suppose that the firm faces a marginal cost of $2 per unit, and a fixed cost of 30 which is not sunk (this means that the fixed cost does not have to be paid if the firm does not produce anything). How much output does the monopolist produce and what is its price? Show your work and explain your answer. Illustrate your answer with a graph. (c) Is there a deadweight loss from this monopoly? If so, solve for it, and show your work. Identify the deadweight loss on your graph. (d) Suppose instead that the fixed cost increases to 50 (still not sunk). Will your answer to (b) change? Explain.arrow_forwardAssume quantities must be integers. Assume costs and prices in Indian Rupees. A monopolist constrained to charging the same price for each unit incurs a per-unit cost of *6 and faces the following demand schedule. What is consumer surplus when the monopolist charges the profit maximizing price? MWTP 27 18 16 14 12 10 8 642 Q 1 2 3 4 5 6 78910 Round to two decimal places and do not enter the currency symbol. If your answer is *1.125, enter 1.13.arrow_forwardFor Question#4 and Question#5 below, how do you get 93 and 5059?arrow_forward
- Suppose the market demand function (expressed in dollars) for a normal product is P= 90-q, and the marginal cost (in dollars) of producing it is MC = 1q, where P is the price of the product and q is the quantity demanded and/or supplied 1. Compute the consumer surplus and the producer surplus assuming this same product was supplied by a monopolist. Note that the monopolist’s marginal revenue curve has twice the slope of the demand curve. 2. Compare and contrast economic surpluses under monopoly market vs competitive market. 3.arrow_forwardPlease explain why this answer is correct.arrow_forwardThe demand curve P=120-Q is what a monopolist deals with. The marginal cost and marginal revenue curves for the monopolist are shown by the equations MC=2Q and MR=120-2Q, respectively. How much deadweight is lost as a result of monopoly?30200300150arrow_forward
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