Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services
16. Regulating a natural monopoly
Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services, the company's marginal-revenue (MR), marginal-cost (MC), and average-total-cost (ATC) curves.
Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
Complete the first row of the following table.
Suppose that the government forces the monopolist to set the price equal to marginal cost.
Complete the second row of the previous table.
Suppose that the government forces the monopolist to set the price equal to average total cost.
Complete the third row of the previous table.
True or False: Dver time, the cable company has a very strong incentive to lower costs when subject to average-cost pricing regulations.
True
False
Homework Answers
| Pricing Mechanism | Quantity | Price | Profit | Long run Decision |
| PM | 7000 | 65 | Positive |
Stay in business |
| MC | 14000 | 30 | Negative |
Exit the industry |
| AC | 13000 | 35 | Zero |
Stay or Exit |
The statement is False
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Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services
9. Regulating a natural monopoly Consider the local cable company, a natural monopoly
9. Regulating a natural monopoly Consider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete...
Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services and the company's marginal revenue (MR)
9. Regulating a natural monopoly Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Complete the second row of the previous table. Suppose that the government forces the monopolist to set...
Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints.
Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. True or False: Under the average-cost pricing policy, the cable...
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for...
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for phone services, the company's marginal revenue curve (labeled MR), its marginal cost curve (labeled MC), and its average total cost curve (labeled ATC). You can hover over the points on the graph to see their exact coordinates. PRICE, COST, MR (Dollars per month) 100 90 80 70 60 Demand 50 40 30 ATC 20 MC 10 MR 54 60 30 36 42 48 0...
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for...
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for phone services, the company's marginal revenue curve (labeled MR), Its marginal cost curve (labeled MC), and its average total cost curve (labeled ATC). You can hover over the points on the graph to see their exact coordinates. PRICE (Dollars per month) 200 180 ATC 160 140 120 100 Demand 80 60 40 MC 20 MR - 0 6 12 18 24 30 36 42...
please make sure you answer all the questions, thank you 9. Regulating a natural monopoly Consider...
please make sure you answer all the questions, thank you
9. Regulating a natural monopoly Consider the local telephone company, a natural monopoly. The following araph shows the monthly demand curve for phone services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves 100 90 80 70 60 50 40 ATC MO 30 20 10 MRI I 20 16 18 4 6 810 12 14 2 QUANTITY (Thousands of subscriptions) PRICE (Dollars per sub...
The following graph shows the demand (D) for cable services in the imaginary town of Utilityburg.
8. Natural monopoly analysisThe following graph shows the demand (D) for cable services in
the imaginary town of Utilityburg. The graph also shows the
marginal revenue (MR) curve, the marginal cost (MC) curve, and the
average total cost (ATC) curve for the local cable company, a
natural monopolist.On the following graph, use the black point (plus symbol) to
indicate the profit-maximizing price and quantity for this natural
monopolist. Which of the following statements are true about this natural monopoly? Check all...
The following graph shows the demand (D) for cable services in a particular town. The graph...
The following graph shows the demand (D) for cable services in a particular town. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable company, a natural monopolist. PRICE AND COSTS (Dollars per subscription P4 ATC PI Mc MR 1 02 03 QUANTITY İ Number of subscriptions! Based solely on the graph, which of the following prinopal tvpes of barriers to entry is the natural...
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8. Natural monopoly analysis The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas company, a natural monopolist.On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.Which of the following statements are true about this natural monopoly? Check all that...
3. The chart illustrates your local water comnany's natural monopoly. The diagram shows the demand curve...
3. The chart illustrates your local water comnany's natural monopoly. The diagram shows the demand curve for water, the company's marginal revenue curve. its marginal cost curve (marginal costs are constant), and its average total cost curve. The government wants to regulate the monopolist by imposing a price ceiling. (20 points) a. Label the curves -Demand (D) Marginal Revenue (MR) Marginal Cost (MC) and Average Total cost (ATC) b. If the government does not regulate this monopolist, which price will...
Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the previous table. Suppose that the government forces the monopolist to set the price equal to average total cost. Complete the third row of the previous table. True or False: Under the average-cost pricing policy, the cable...
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for phone services, the company's marginal revenue curve (labeled MR), its marginal cost curve (labeled MC), and its average total cost curve (labeled ATC). You can hover over the points on the graph to see their exact coordinates. PRICE, COST, MR (Dollars per month) 100 90 80 70 60 Demand 50 40 30 ATC 20 MC 10 MR 54 60 30 36 42 48 0...
Consider the local telephone company, a natural monopoly. The following graph shows the demand curve for phone services, the company's marginal revenue curve (labeled MR), Its marginal cost curve (labeled MC), and its average total cost curve (labeled ATC). You can hover over the points on the graph to see their exact coordinates. PRICE (Dollars per month) 200 180 ATC 160 140 120 100 Demand 80 60 40 MC 20 MR - 0 6 12 18 24 30 36 42...
please make sure you answer all the questions, thank you
9. Regulating a natural monopoly Consider the local telephone company, a natural monopoly. The following araph shows the monthly demand curve for phone services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves 100 90 80 70 60 50 40 ATC MO 30 20 10 MRI I 20 16 18 4 6 810 12 14 2 QUANTITY (Thousands of subscriptions) PRICE (Dollars per sub...
The following graph shows the demand (D) for cable services in a particular town. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable company, a natural monopolist. PRICE AND COSTS (Dollars per subscription P4 ATC PI Mc MR 1 02 03 QUANTITY İ Number of subscriptions! Based solely on the graph, which of the following prinopal tvpes of barriers to entry is the natural...
3. The chart illustrates your local water comnany's natural monopoly. The diagram shows the demand curve for water, the company's marginal revenue curve. its marginal cost curve (marginal costs are constant), and its average total cost curve. The government wants to regulate the monopolist by imposing a price ceiling. (20 points) a. Label the curves -Demand (D) Marginal Revenue (MR) Marginal Cost (MC) and Average Total cost (ATC) b. If the government does not regulate this monopolist, which price will...
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