Hand written solutions are strictly prohibited B. 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 prife and quantity for this natural monopolist.?PRICE (Dollars per subscription)100R5040302010002MR468 10 12 14QUANTITY (Number of subscriptions)16ATCMC-18 20DMonopoly Outcome 3PRICE (Dollars per suf8402010002MR4 . . 10 12 14 16QUANTITY (Number of subscriptions)O TrueATCKICFalse18 20Which of the following statements are true about this natural monopoly? Check all that apply.DThe cable company is experiencing diseconomies of scale.In order for a monopoly to exist in this case, the government must have intervened and created it.It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.The cable company is experiencing economies of scale.True or False: Without government regulation, natural monopolles can earn positive profit in the long run.

The natural monopoly is a kind of monopoly that occurs due to a very high start-up or fixed cost. It…

B. Natural monopoly analysis The 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 prije and quantity for this natural monopolist. PRICE (Dollars per subscription) 100 2 70 60 50 40 30 20 10 0 0 2 MR 460 10 12 14 QUANTITY (Number of subscriptions) 16 ATC MC 16 20 D Monopoly Outcome

B. Natural monopoly analysis The 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 prije and quantity for this natural monopolist. PRICE (Dollars per subscription) 100 2 70 60 50 40 30 20 10 0 0 2 MR 460 10 12 14 QUANTITY (Number of subscriptions) 16 ATC MC 16 20 D Monopoly Outcome

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 33P: Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the...

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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?
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?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium for such a market. b. Now suppose the demand for Hula Hoops shifts outward slightly. Show that, in general (contrary to the competitive case), it will not be possible to predict the effect of this shift in demand on the market price of Hula Hoops. c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.
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.)
Can you think of any examples of successful predatory pricing in the real world?
What is a natural monopoly?