Question 1

-Pinesboro Herald is the only local newspaper in the city of Pinesboro. The publisher faces the demand schedule shown in the first table above and has the cost schedule shown in the second table above.
a) Calculate the marginal revenue schedule. In a figure, draw the demand curve and the marginal revenue curve.
b) Calculate the publisher's marginal cost and average total cost schedules. In the same figure that you drew the demand and marginal revenue curves, draw the marginal and the average total cost curves.
c) What are the publisher's profit-maximizing output and price? What is the publisher's economic profit per day?
d) At the price charged, is the demand for newspapers elastic or inelastic? Explain your answer.
e) Does the publisher use resources efficiently? What is the deadweight loss? Explain your answer.
f) Will the publisher try to price discriminate? Why or why not?

Accepted Answer

The answer of  
-Pinesboro Herald is the only local...

Question 2

If the local cable TV company is a natural monopoly and required by regulators to set its price equal to marginal cost, there is a deadweight loss in the market and the firm might need a government subsidy to survive.

Accepted Answer

If the local cable TV company is a natural monopoly, setting its price equal to marginal cost would result in a loss for the firm. In such cases, the firm would need to set the price higher than marginal cost to cover its fixed cost and earn a profit to survive. Therefore, there would be no deadweight loss or need for government subsidy in this scenario.

Question 3

-West Coast Gas, Inc., is a natural gas supplier. The firm faces the demand schedule shown in the table above and cannot price discriminate. The company's fixed cost is $1,000 per month and its marginal cost is constant at $10 per thousand of cubic feet.
a) Draw the demand curve faced by West Coast Gas and the marginal revenue curve. Draw the company's marginal cost and average cost curves.
b) Is West Coast Gas a natural monopoly? Why or why not?
c) What are the firm's profit-maximizing output and price? What is the firm's economic profit per month?
d) If West Coast Gas maximizes its profit, does it also maximize total surplus? Why or why not? What is the deadweight loss (if any)?

Accepted Answer

The answer of 
-West Coast Gas, Inc., is a natural...

Question 4

-Anastasia's Gold Mines, a single-price monopoly, faces the demand schedule shown in the first table above and has the cost schedule shown in the second table above.
a) Calculate Anastasia's marginal revenue schedule. In a figure, draw the demand curve and the marginal revenue curve.
b) Calculate Anastasia's marginal cost and average total cost schedules. In the same figure that you drew the demand and marginal revenue curves, draw the marginal and the average total cost curves.
c) What are Anastasia's profit-maximizing output and price? What is Anastasia's economic profit? Explain your answer.
d) Does Anastasia's Gold Mines use resources efficiently? Explain your answer.

Accepted Answer

The answer of  
-Anastasia's Gold Mines, a single-price monopoly,...

Question 5

-West Coast Gas, Inc., is a natural gas supplier. The firm faces the demand schedule shown in the table above and cannot price discriminate. The company's fixed cost is $1,000 per month and its marginal cost is constant at $10 per thousand of cubic feet. The government imposes a marginal cost pricing rule on the company.
a) What is the price of natural gas supplied by West Coast Gas? How many cubic feet does the company sell? What is the firm's economic profit per month?
b) How does the regulation affect total surplus?
c) Is the regulation in the social interest? Explain.

Accepted Answer

The answer of 
-West Coast Gas, Inc., is a natural...

Question 6

-Adele's Springs produces a unique mineral water. The firm faces the demand schedule shown in the first table above and has the cost schedule shown in the second table above.
a) Calculate Adele's marginal revenue schedule. In a figure, draw the demand curve and the marginal revenue curve.
b) Calculate Adele's marginal cost and average total cost schedules. In the same figure that you drew the demand and marginal revenue curves, draw the marginal and the average total cost curves.
c) What are Adele's profit-maximizing output and price? What is Adele's economic profit? Explain your answer.
d) Does Adele's Springs use resources efficiently? Explain your answer.

Accepted Answer

The answer of  
-Adele's Springs produces a unique mineral...

Quiz 13: Monopoly

If the local cable TV company is a natural monopoly and required by regulators to set its price equal to marginal cost, there is a deadweight loss in the market and the firm might need a government subsidy to survive.