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Economics Problem

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Question;In Figure 27.2;(a) How much profit does an unregulated monopolist earn?;(b) How much profit would be earned if MC pricing were imposed?;2. Do total profits (A) decrease, (B) increase, or (C) stay the same when new technology reduces average total costs (shifts ATC downward in Figure 27.2) in;(a) An unregulated natural monopoly?;(b) A price-regulated natural monopoly?;(c) A profit-regulated natural monopoly?;3. Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demand for the product is as follows: Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 Quantity demanded (units per day) 0 2 4 6 8 10 12 14 16 18 Under these conditions;(a) What price and quantity will prevail if the monopolist isn?t regulated? (a1) Price (a2) Quantity;(b) What price?output combination would exist with efficient pricing (MC 5 p)? (b1) Price (b2) Quantity;(c) What price?output combination would exist with profit regulation (c1) Price (zero economic profits)?;(c2) Quantity Illustrate your answers on the following graph: Price or Cost (dollars per unit) 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Quantity (per unit)

 

Paper#57740 | Written in 18-Jul-2015

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