The figure to the right shows the average cost of production (AC) for a cablecompany that is a monopoly as well as the corresponding demand (D) for cablesubscriptions in the city to which the company provides service.Is this company a natural monopoly?This firmO A. is a natural monopoly because average cost is decreasing when itcrosses demand.B.is not a natural monopoly because its demand is downward sloping.C. is a natural monopoly because total cost does not always increase withoutput.O D.is a natural monopoly because it has excess capacity.O E. is not a natural monopoly because it must advertise.Price (dollars per subscription)80-76-72-68-64-60-56-52-48-44-40-36-32-28-24-20-16-12-8-4-0-DAC5689Quantity (cable subscriptions in 1000s)Ⓡ10

A monopoly market is defined as the output produced by solely one market. The output price is…

The figure to the right shows the average cost of production (AC) for a cable company that is a monopoly as well as the corresponding demand (D) for cable subscriptions in the city to which the company provides service. Is this company a natural monopoly? This firm O A. is a natural monopoly because average cost is decreasing when it crosses demand. O B. is not a natural monopoly because its demand is downward sloping. C. is a natural monopoly because total cost does not always increase with output. O D. O E. is a natural monopoly because it has excess capacity. is not a natural monopoly because it must advertise. Price (dollars per subscription) 80 76- FONOS 724 68- 64- 60- 56- 52- 48- 44- 40- 36- 32- 28- 24- 20- 16- 12- 8- 4- 0- D 6 Quantity (cable subscriptions in 1000s) AC 10

The figure to the right shows the average cost of production (AC) for a cable company that is a monopoly as well as the corresponding demand (D) for cable subscriptions in the city to which the company provides service. Is this company a natural monopoly? This firm O A. is a natural monopoly because average cost is decreasing when it crosses demand. O B. is not a natural monopoly because its demand is downward sloping. C. is a natural monopoly because total cost does not always increase with output. O D. O E. is a natural monopoly because it has excess capacity. is not a natural monopoly because it must advertise. Price (dollars per subscription) 80 76- FONOS 724 68- 64- 60- 56- 52- 48- 44- 40- 36- 32- 28- 24- 20- 16- 12- 8- 4- 0- D 6 Quantity (cable subscriptions in 1000s) AC 10

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter12: Government And Product Markets: Antitrust And Regulation

Section: Chapter Questions

Problem 12QP

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Similar questions

If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
Suppose demand for a monopolys product falls 50 that its profit-maximizing price is below average variable cost. How much output should the film supply? Hint: Draw the graph.
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
What is a natural monopoly?
In what sense is a natural monopoly natural?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?