8. Natural monopoly analysisThe following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginalrevenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water 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.?PRICE (Dollars per hundred cubic feet)4036322824201612ATCMCMRD012345678910QUANTITY (Hundreds of cubic feet)Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply.In order for a monopoly to exist in this case, the government must have intervened and created it.The water company is experiencing diseconomies of scale.The water company is experiencing economies of scale.It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers.True or False: Without government regulation, natural monopolies can earn positive profit in the short run.TrueFalse

This can be defined as a form of market in which there is only one provider of that particular…

revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water 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. PRICE (Dollars per hundred cubic feet) 40 36 28 24 20 16 22222 12 4 ATC MC MR 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Hundreds of cubic feet) Monopoly Outcome ?

revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water 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. PRICE (Dollars per hundred cubic feet) 40 36 28 24 20 16 22222 12 4 ATC MC MR 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Hundreds of cubic feet) Monopoly Outcome ?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter14: Indirect Price Discrimination

Section: Chapter Questions

Problem 4MC

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Similar questions

In what sense is a natural monopoly natural?
What is the usual shape of a total revenue curve for a monopolist? Why?
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?
What is a natural monopoly?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
8. Natural monopoly analysis The following graph gives the demand (D) curve for satellite TV services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local satellite TV 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. a)Which of the following statements are true about this natural monopoly? Check all that apply. O. In order for a monopoly to exist in this case, the government must have intervened and created it. O. The satellite TV company must own a scarce resource. O. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. O. The satellite TV company is experiencing diseconomies of scale. b) True or False: Without government regulation, natural monopolies can earn…
Consider the electricity industry, in which there are very large fixed costs but also in which variable costs are directly proportional to total output so that the marginal cost of each unit produced is small and constant. a) Assuming that one firm has an electricity monopoly, draw a diagram that shows the price the monopolist charges and the quantity the monopolist sells at this price. Be sure to include marginal cost, average total cost, marginal revenue, and demand curves in your diagram. What happens if the electricity industry is perfectly competitive? More specifically, let us assume that the marginal cost curve from part (a) is equal to the perfectly competitive market supply curve. In this case, show in a diagram what the perfectly competitive equilibrium price and quantity in this industry are. What will happen to the number of firms producing electricity in the long run? What does this say about the desirability of monopoly vs. perfect competition in this industry?…
Suppose that Eric has a Magazine monopoly. The following table gives Eric's demand and costs per month for subscriptions to basic cable: Price Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost $27 3 $56 26 4 73 25 5 91 24 6 110 23 7 130 22 8 151 a. If Eric wants to maximize profits, what price should it charge, and how many Magazine subscriptions per month should it sell? How much profit will Eric make? Suppose the local government imposes a $45 per month tax on Magazine companies. b. What price should Eric now charge, and how many subscriptions should it sell? What will its profits be?
Q2: Suppose that the foreign country (say, France) has a monopoly in the airplane industry and the home country (say, China) is considering imposing a tariff on airplane imports from France. Use a demand-, supply-, and marginal-revenue-curve graph to show: The effect of this tariff on the foreign monopolist’s profit; The effect of this tariff on the home country’s consumer surplus, government revenue, and total welfare. Is the home country unambiguously worse off as a result of the tariff? When would the country become better off?
In the following table, which contains the demand schedule for a monopolist, enter the total revenue (TR) and marginal revenue (MR) for each price. For each price–quantity combination (that is, table row), indicate whether demand is elastic, unitary elastic, or inelastic at that point on the demand curve. Hint: Do not calculate the price elasticity of demand mathematically. Instead, use what you know about elasticity along different segments of a linear demand curve to determine the elasticity of each price–quantity combination.
The figure shows what type of market? >>Please add an explanation of how natural monopoly differs in graph vs. normal monopoly.
The information in the table below shows the demand schedule for water in a certain small town. Assume the marginal cost of supplying water is constant at $4 per bottle. Price Quantity (bottles) $9 200 $8 400 $7 600 $6 800 $5 1000 $4 1200 $3 1400 $2 1600 (Note: You may want to extend this table to generate additional data. If you do, you need not submit the extended table.) 1. Suppose the town enacts new antitrust laws that prohibit Victor and Sam from operating as a monopolist. What will the new price be and what quantity of water will each of them produce once the Nash equilibrium is reached? How much is the total market quantity? 2. Under the conditions given in Question #1 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium (show solution)? 3. If there were many sellers in this market, what would be the output and price?