Refer to the graph of an electric utility that has a natural monopoly.If regulators want to achieve economic efficiency, what price wouldregulators require the utility to charge?OA. P₁O B. P₂Ⓒ C. P3O D. None of the above.What price will ensure that the owners of the utility will break evenon their investment?OA. P₁B. P₂O C. P3D. None of the above.CPrice and costQP2P3LossMRQ₁ Q₂ Q3QuantityDMCATCQ

When a single company can produce a good or service at a lower cost than the other companies. In a…

Refer to the graph of an electric utility that has a natural monopoly. If regulators want to achieve economic efficiency, what price would regulators require the utility to charge? OA. P₁ OB. P₂ C. P3 D. None of the above. What price will ensure that the owners of the utility will break even on their investment? O A. P₁ OB. P₂ C. P3 D. None of the above. → Price and cost P2 P3 Loss MR Q₁ Q₂ Q3 Quantity MC ATC Q Q G

Refer to the graph of an electric utility that has a natural monopoly. If regulators want to achieve economic efficiency, what price would regulators require the utility to charge? OA. P₁ OB. P₂ C. P3 D. None of the above. What price will ensure that the owners of the utility will break even on their investment? O A. P₁ OB. P₂ C. P3 D. None of the above. → Price and cost P2 P3 Loss MR Q₁ Q₂ Q3 Quantity MC ATC Q Q G

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 10PA

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2. Acme Pharmaceutical Company discovers a vaccine that prevents the common cold and has a patent that grants it a monopoly on this drug. Acme has plants in both the North America and Europe and can manufacture the drug on either continent at a marginal cost of $10. Assume there are no fixed costs. In Europe, the demand for the drug is QE = 70 PE, where QE is the quantity demanded when the price in Europe is PE. In North America the demand for the drug is QN = 110 - PN, where QN is the quantity demanded when the price in North America is PN (a) Determine the aggregate demand function for the combined mar- ket. Determine the inverse demand function for the combined market and the inverse demand functions for each of the two mar- kets separately. (b) To begin, assume that it is illegal for the firm to price discriminate, so that it can charge only a single price P on both continents. What price will it charge, and what profits will it earn?
e ap sep 0 ja ajaloo Purwas ap o Consider a town in which only two residents, Clancy and Eileen, own wells that produce water safe for drinking. Clancy and Eileen can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Tab Caps Lock Price (Dollars per gallon) 6.00 5.50 5.00 4.50 Esc is 81°F Sunny 4.00 3.50 3.00 2.50 2.00 1.50 1.00 ! 0.50 0 7 Q A Quantity Demanded (Gallons of water) 0 45 17 F2 8- @ Suppose Clancy and Eileen form a cartel and behave as a monopolist. The profit-maximizing price is $ gallons. As part of their cartel agreement, Clancy and Eileen agree to split production equally. Therefore, Clancy's profit is - C VE 2 W 90 135 S. 180 225 270 315 360 405 450 495 540 F3 0+ #M 3 Total Revenue (Dollars) 0 $247.50 $450.00 $607.50 $720.00 $787.50 $810.00 $787.50 $720.00 $607.50 E F4 BO $450.00 $247.50 0 D $ 4 F5 R F % 5 F6 D T F7 ^ 6 G 4- Y FB J+ & 7 per gallon, and the total…
3. A monopolist movie streaming service has two kinds of movies in its library - Action (A) and Romantic Comedies (R). Demand: There are two groups of consumers (Group X and Group Y) for the streaming service with the following value for each movie genre: Genre A Value Group X $100 Group Y $80 Value Group X $50 Group Y $70 Cost: The cost of streaming each type of content is MCA = $0, MCR = $60. Efficient Outcome a) Describe the efficient outcome by filling the table below Should X consume? (Y/N) Should Y consume? (Y/N) Consumption of A Consumption of R Total Efficient Surplus Genre R Surplus from efficient consumption (Value - Cost)
28 $55 $50 $45 MC АТС I of $40 $35 $30 $25 $20 Demand = P $15 $10 $5 $0 MR 40 80 120 160 200 240 Output (Q) The diagram above shows the Demand, MR, and cost curves for a monopolist in the short-run. At the profit maximizing Output (Q) level, the monopolist will earn a Total Profit of: Sel one: а. $1,200 b. $2,200 c. $800 d. $2,000 $$
Elixir Springs, Inc., is an unregulated European natural monopoly that bottles Elixir, a unique health product with no substitutes. The total fixed cost incurred by Elixir Springs is €150,000,€150,000, and its marginal cost is 10 cents a bottle. The figure illustrates the demand for Elixir.a What is the price of a bottle of Elixir?b How many bottles does Elixir Springs sell?c Does Elixir Springs maximize total surplus or producer surplus?
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O OO The above graph shows the market demand function for a product. Assume that the market is served by a perfectly-price-discriminating monopolist with a constant marginal cost of production equal to $4 (MC = $4) and no fixed cost (FC = 0). The deadweight loss equals: DWL - $72 DWL - $0 DWL- -$48 DWL - $84 DWL-$36 $30 $28 $26 $24 $22 $20 Question 23 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
There are 10 households in Lake Wobegon, Minnesota, each with a demand for electricity of Q- 60 - P. Lake Wobegon Electric's (LWE) cost of producing electricty is TC = 600 + 20. a. If the regulators of LWE want to make sure that there is no deadweight loss in this market, what price will they force LWE to charge? What will output be in that case? Calculate consumer surplus and LWE's profit with that price. (Round all responses to two decimal places.) The regulated price would be s2, and the firm would produce 580' units of electricity. Total consumer surplus would be $ 16,820, and the firm would earn a S - 600 profit. b. If reguiators want to ensure that LWE doesn't kose money, what is the lowest price they can impose? Calculate output, consumer surplus, and profit. Is there any deadweight loss? (Round all responses to two decimal places.) The regulated price would be $ and the firm would produce units of alectricity. Total consumer surplus would be $, and the firm would earn a s…
Question 4 Think a price making firm (monopolist) with a downward-sloping demand curve is one with a price elasticity of demand equal to-1. This is illustrated in the following diagram. P=AR 20 Expenditure stays the same as price changes TR AR = = Q d (TR) dQ Slope = b/Q 40 100 Diagram 5 Unit elastic demand (Pe=-1) MR = As price and quantity change by the same proportion, total revenue is the same at each price (the TR curve is horizontal). This gives the following TR, AR and MR equations: TR=b b -D (AR) Q = 0 Q As TR is constant at all outputs, so MR must equal zero. In diagram 5, what is the value of b in equation TR=b?
Deadweight Loss and Demand Elasticity. Using the linked figure as a starting point, consider a similar product that has the same monopoly price and quantity ($18 and 200 doses), but a more elastic demand. The long-run marginal cost is the same ($8). a. A more elastic demand generates a market demand curve. C Price ($) $18 b C $8 Long-run marginal cost and market supply Market Demand :200 400 Doses of drug per hour
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