Consider a monopolist described by the following equations: Market demand for monopolist's product: P = 100...
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Consider a monopolist described by the following equations: Market demand for monopolist's product: P = 100 - Q ATC for monopolist: ATC= 20 +(3/10) Q MC for monopolist: MC = 20+ (3/5)Q In this question we will use the above data to compare a single price monopolist to the same monopolist that is regulated either with average cost regulation or marginal cost regulation. At the end of the question you will fill out a table to compare your results. a. Given the above information, what is the profit maximizing price and quantity for the single price monopolist? You should round your answers to the nearest whole number. b. Given the above information, what is the level of profit for this single price monopolist? c. Suppose this monopolist is regulated to produce at that quantity where price equals average total cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario. d. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals average total cost. Explain how you got your answer. e. Suppose this monopolist is regulated to produce at that quantity where price equals marginal cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario. f. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals marginal cost. g. How big a subsidy will the monopoly require in order to be willing to produce at the price and quantity you calculated in part (e)? Explain your answer. h. Fill in the table below with your findings. Remember that a firm is allocatively efficient if price is equal to marginal cost for the last unit of the good produced by the firm. Single Price Monopolist Price Quantity Profits Subsidy Needed to Produce Allocatively Efficient? Monopolist regulated with Average Cost Regulation Monopolist regulated with Marginal Cost Regulation Consider a monopolist described by the following equations: Market demand for monopolist's product: P = 100 - Q ATC for monopolist: ATC= 20 +(3/10) Q MC for monopolist: MC = 20+ (3/5)Q In this question we will use the above data to compare a single price monopolist to the same monopolist that is regulated either with average cost regulation or marginal cost regulation. At the end of the question you will fill out a table to compare your results. a. Given the above information, what is the profit maximizing price and quantity for the single price monopolist? You should round your answers to the nearest whole number. b. Given the above information, what is the level of profit for this single price monopolist? c. Suppose this monopolist is regulated to produce at that quantity where price equals average total cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario. d. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals average total cost. Explain how you got your answer. e. Suppose this monopolist is regulated to produce at that quantity where price equals marginal cost. Calculate the quantity the monopolist will produce and the price it will charge given this regulatory scenario. f. Calculate the level of profits for the monopoly if it is regulated to produce that quantity where price equals marginal cost. g. How big a subsidy will the monopoly require in order to be willing to produce at the price and quantity you calculated in part (e)? Explain your answer. h. Fill in the table below with your findings. Remember that a firm is allocatively efficient if price is equal to marginal cost for the last unit of the good produced by the firm. Single Price Monopolist Price Quantity Profits Subsidy Needed to Produce Allocatively Efficient? Monopolist regulated with Average Cost Regulation Monopolist regulated with Marginal Cost Regulation
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Related Book For
Statistics For Business And Economics
ISBN: 9780321826237
12th Edition
Authors: James T. McClave, P. George Benson, Terry T Sincich
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