(c) One solution to the problems of marginal-cost pricing of a regulated natural monopolist is average cost pricing. In this model, the monopolist is allowed to price its production at average total cost. Differentiate between an average-cost pricing and marginal-cost pricing.
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- Which of the following statements about a monopoly is true? (a) The monopolist has a flat demand curve because of high barriers to entry.(b) For a monopolistic firm, profit will be maximised where price = marginalrevenue.(c) In the long run, a monopolist can earn only normal profits.(d) Price, in the long run, is not usually equal to the minimum average totalcost.Q.1.19 Which of the following will NOT shift the market supply of labour curve? (a) A change in the wages of the labourers.(b) A change in migration.(c) A change in the size of the population due to a change in birth or deathrates.(d) Trade union action.The SolarFarm powerplant has both fixed and variable costs. As the plant expands production, it first has constant returns to scale, and then diminishing returns to scale. (a) Draw a large graph showing (only) the firm’s marginal costs and average total costs in a suitably labelled graph. Show on the graph where the firm’s technology changes from constant-returns to diminishing-returns. SolarFarm is a monopolist with a downward sloping demand curve. Add to your graph a demand and marginal revenue curve. Assume that the demand curve intercepts the average cost curve at its minimum point. Show the quantity and price of electricity in this market. (b) The government connects SolarFarm to a nearby town that is currently without electricity. Show in a new, large, graph how the market price and quantity of electricity sold change as a result. (c) Return to the situation in part (a) of this question. The government discovers a new technology that would allow SolarFarm to never experience…The SolarFarm powerplant has both fixed and variable costs. As the plant expands production, it first has constant returns to scale, and then diminishing returns to scale. (a) Draw a large graph showing (only) the firm’s marginal costs and average total costs in a suitably labelled graph. Show on the graph where the firm’s technology changes from constant-returns to diminishing-returns. SolarFarm is a monopolist with a downward sloping demand curve. Add to your graph a demand and marginal revenue curve. Assume that the demand curve intercepts the average cost curve at its minimum point. Show the quantity and price of electricity in this market. (b) The government connects SolarFarm to a nearby town that is currently without electricity. Show in a new, large, graph how the market price and quantity of electricity sold change as a result. (c) Return to the situation in part (a) of this question. The government discovers a new technology that would allow SolarFarm to never experience…
- The SolarFarm powerplant has both fixed and variable costs. As the plant expands production, it first has constant returns to scale, and then diminishing returns to scale.(a) Draw a large graph showing (only) the firm’s marginal costs and average total costs in a suitably labelled graph. Show on the graph where the firm’s technology changes from constant-returns to diminishing-returns.SolarFarm is a monopolist with a downward sloping demand curve. Add to your graph a demand and marginal revenue curve. Assume that the demand curve intercepts the average cost curve at its minimum point. Show the quantity and price of electricity in this market.The SolarFarm powerplant has both fixed and variable costs. As the plant expands production, it first has constant returns to scale, and then diminishing returns to scale. (a) Draw a large graph showing (only) the firm’s marginal costs and average total costs in a suitably labelled graph. Show on the graph where the firm’s technology changes from constant-returns to diminishing-returns. SolarFarm is a monopolist with a downward sloping demand curve. Add to your graph a demand and marginal revenue curve. Assume that the demand curve intercepts the average cost curve at its minimum point. Show the quantity and price of electricity in this market. (b) The government connects SolarFarm to a nearby town that is currently without electricity. Show in a new, large, graph how the market price and quantity of electricity sold change as a result. (c) Return to the situation in part (a) of this question. The government discovers a new technology that would allow SolarFarm to never experience…Price, Cost P4 P3- P2 P₁- MR ATC MC D Q₁ Q₂ Q3 Q4 Quantity The graph above shows the cost and revenue curves for a natural monopoly that provides electrical power to the town of Fanaland. If unregulated, the monopolist operates to maximize its profit. (a) Identify the monopolist's profit-maximizing quantity and price. (b) Assume the town government of Fanaland regulates the monopolist's price to achieve the allocatively efficient quantity. What price would the government set in order to achieve the allocatively efficient quantity? Explain. (c) Will producing the allocatively efficient quantity be economically feasible for the monopolist? profit? (d) Suppose instead the town government wants to regulate the monopolist to earn zero economic profit. What price would the government set to have the monopolist earn zero economic that of the unregulated monopolist? Explain: (e) Based on your answer to part (d), will the deadweight loss increase, decrease, or stay the same as
- Q. Suppose that the demand equation for a monopolist is p = 100 − .01x and the cost function is C(x) = 50x + 10,000.(a) Find the value of x that maximizes the profit.(b) Determine the corresponding price and total profit for this level ofproduction.(c) Find the highest price that can be charged per unit to sell all.(d) The revenue function is R(x) = 100x − 0.01x2, so the marginal revenuefunction is R (x) = 100 − 0.02x. The cost function is C(x) = 50x + 10,000, so the marginal cost function is C (x) = 50. Let us now equate the two marginal functions and solve for x:(e) If the fixed cost is increased from $10,000 to $15,000, the new cost function will be C(x) = 50x + 15,000, but the marginal cost function will still be C (x) = 50. Therefore, the solution will be the same: 2500 units should be produced and sold at $75 per unit. (Increases in fixed costs should not necessarily be passed on to the consumer if the objective is to maximize the profit.)a)What are the main characteristics of a monopolist firm? b) Suppose a monopolistically competitive firm operates in a long run which produces 50units of output at 150 taka per-unit cost (average total cost). Also MC of producing 50 unitoutput is 80 taka. By using this information, show the long run situation of a monopolisticallycompetitive firm in an appropriate diagram. c) Calculate excess capacity if socially efficient output is 120 units. Show it in graph too.[Note: b) and c) are related questions and draw separate graphs for each question](2) function p = A monopolist (public utility company) serves a market with inverse demand 20 – q. The monopolist's long-run cost function is C(q) = 10 + 2q if q > 0 and C(0) = 0. %3| (a) If the monopolist is not regulated, what price does it charge and how much output does produce? (b) The government wants to regulate the monopolist to maximize social surplus. Describe an optimal regulation policy that ensures the monopolist does not exit the market. How much does social surplus increase with this policy?
- Suppose a manufacturer sells to a retailer of its product. Final market demand for the product is given by P = a - bQ. The marginal cost of upstream manufacture is c. The unit costs associated with retailing are zero.(A) Suppose that the two stages are integrated and operated by a monopolist. What would the integrated monoply price of the final product be? What is the profit of the integrated monopolist? (B) Now assume that the two stages are not integrated, and in addition, each stage is a separate monopoly. Solve for the input price (that is, the price the manufacturer sets), the final product price, and the profits of each of the two stages.Assume an oligopolist confronts two possible demand curves for its own output, as illustrated below. The first (A) prevails if other oligopolists don't match price changes. The second (B) prevails if rivals do match price changes. Price (dollars per unit) 19- 17 Demand B 15- Demand A 13- 11. 8 10 12 14 16 18 20 Quantity (units per period) (a) By how much does quantity demanded increase if price is reduced from $11 to $9 and Instructions: Enter your responses rounded to the nearest whole number. (i) Rivals match the price cut? (ii) Rivals don't match the price cut? (b) By how much does quantity demanded decrease when price is raised from $11 to $15 and Instructions: Enter your responses rounded to the nearest whole number (do not include negative signs). (i) Rivals match the price hike? (ii) Rivals don't match the price hike?Based on the best available econometric estimates, the market elasticity of demand for your firm's product is -2. The marginal cost of producing the product is constant at $150, while average total cost at current production levels is $225. Determine your optimal per unit price if: a. you are a monopolist b. you compete against one other firm in a Cournot oligopoly c. you compete against 19 other firms in a Cournot oligopoly