Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Complete the first row of the following table. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Complete the third row of the previous table. ||||| O True Profit Suppose now that the government decides to require the monopolist to set its price equal to average total cost. O False Long-Run Decision True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. Complete the first row of the following table. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Complete the second row of the previous table. Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Complete the third row of the previous table. ||||| O True Profit Suppose now that the government decides to require the monopolist to set its price equal to average total cost. O False Long-Run Decision True or False: Over time, the electric company has a very strong incentive to lower costs when subject to average-cost pricing regulations.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter13: Monopoly And Antitrust

Section: Chapter Questions

Problem 6P

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Similar questions

From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
What is the usual shape of a total revenue curve for a monopolist? Why?
If the transit system were allowed to operate as an unregulated monopoly, what output would it supply and what price would it charge?
If public utilities are a natural monopoly, what would be the danger in deregulating them?
What is a natural monopoly?
In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?
In what sense is a natural monopoly natural?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
Is a monopolist allocatively efficient? Why or why not?
If public utilities are a natural monopoly, what would be the danger in splitting them into a number of separate competing firms?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?