Question: The table below shows costs and demand data for a monopoly . Quantity Marginal Average unit Marginal Demanded Price Revenue Cost cost 0 $35.00 100
The table below shows costs and demand data for a monopoly.
Quantity
Marginal
Average unit
Marginal
Demanded
Price
Revenue
Cost
cost
0
$35.00
100
32.00
$ 32.00
$48.00
$48.00
200
29.00
26.00
30.00
12.00
300
26.00
20.00
23.34
10.00
400
23.00
14.00
21.00
14.00
500
20.00
8.00
20.00
16.00
600
17.00
2.00
19.50
17.00
700
14.00
-4.00
19.28
18.00
800
11.00
-10.00
18.68
18.50
900
8.00
-16.00
18.72
19.00
(a)If the monopoly is unregulated by the government:
i.)what price will they charge? Explain why?2 Mark
ii.)what output will they produce?2 Marks
iii.)How much profit will they make?2 Marks
(b)If the monopoly is regulated by the government and is only allowed to sell their product at a price equal to their marginal cost, (Socially Optimal price) using the data in the table:
i.)what price can they charge? Explain why?2 Marks
ii.)what output will they produce?2 Marks
iii.) How much profit will they make?2 Marks
(c)If the monopoly is regulated to charge their average unit cost, (Fair-return price) using the data in the table:
i.)what price will they charge? Explain why?2 Marks
ii.)what output will they produce?2 Marks
iii.)How much profit will they make?2 Marks
(d)When it comes to a monopoly, why do we need the government to help. 2 Marks
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