Suppose that your city grants one pizza delivery service a legal monopoly on delivering pizzas; all...

Suppose that your city grants one pizza delivery service a legal monopoly on delivering pizzas; all other pizza delivery services must close. CLO 4[4 Marks]

a. What will happen to the price and quantity of delivered pizzas?

b. What will happen to the profit of the owner who has been granted the monopoly?

c. Suppose that the owner offers to sell the pizza delivery company to you. Would you be able to earn an economic profit? Be careful when you answer this question; think about the price the previous owner will charge you for the business.

Solutions

Expert Solution

a) if the city grants monopoly to one delivery agency and all the other pizza delivery service close then the price of delivery will increase and the quantity demand will most probably decline.

B) the profit of the owner will increase depending on the price charged by the agency. If they will charge moderate price for delivery that will not pinch customer pocket then the profit will increase as he is the only one to deliver pizza. If the agency charges way too much for delivery then there will be less no. Of orders for pizza and ut will not make the profit to go up for delivery agency.

C)if the owner offers to sell the the delivery agency then the profit that will be earned in the long term depends on the price that you are offered to buy it for and also the no. Of delivery orders the agency gets afterwards. But there is high chance the new owner will also make economic profit as it will also operate as a monopoly.

Rahul Sunny answered 1 week ago

Next > < Previous

Related Solutions

A pizza delivery vendor has a goal of delivering all orders within 50 minutes. A sample...

A pizza delivery vendor has a goal of delivering all orders within 50 minutes. A sample was taken and found a mean of 40 minutes and a sample standard deviation of 6 minutes. Assuming the distribution is normal, what percent of the population did not meet the goal of 50 minutes?

Three pizza places share market for pizzas in a small city. Demand for pizzas is given...

Three pizza places share market for pizzas in a small city. Demand for pizzas is given by Q(p)=4200 - 200p where p - price of pizza and Q is total number of pizzas. Marginal cost of production of pizza is $3 for chain A, $4 for chain B and $5 for chain C. Each has a fixed cost of $3000/week. Due to a combination of economic downtown and local lost of population in the city, the chains find themselves with...

The city of Kansas City establishes a delivery truck that provides service to other departments, all...

The city of Kansas City establishes a delivery truck that provides service to other departments, all of which are accounted for in its general fund. During its first year of operations the shop engages in the following transactions: It purchases equipment at a cost of $50 million and issues long-term notes for the purchase price. The useful life of the equipment is eight years, with no residual value. It purchases supplies at a cost of $8 million. Of these it...

The following businesses are considering location in your community: a) A pizza delivery service, b) A...

The following businesses are considering location in your community: a) A pizza delivery service, b) A sporting goods store, c) A small brewery, and d) A plant making aluminum cans. Describe the positive and negative location factors for each of these businesses. Explain what the following sequencing rules are, and when they should be used, using relevant firm/industry examples to illustrate. (a) SPT; (b) Johnson's Rule; (c) FCFS/FIFO (d) CUSTPR. Identify two KPI’s a firm can use to compare sequencing.

suppose that your demand schedule for pizza is as follows: price (dollars) quantity of pizzas demanded...

suppose that your demand schedule for pizza is as follows: price (dollars) quantity of pizzas demanded (income= $20,000) quantity of pizzas demanded (income= $24,000) 8 40 50 10 32 45 12 24 30 14 16 20 16 8 12 Using the midpoint method, your price elasticity of demand as the price of pizzas increase from $14 to $16 is _____ if your income is $20,000 and ______ if your income is $24,000. if the price of a pizza is...

Pizza Hut is facing stiff competition in it pizza delivery service, and you are the owner...

Pizza Hut is facing stiff competition in it pizza delivery service, and you are the owner who is particularly concerned about being able to provide call-in customers with a guarantee as to how quickly their pizza would arrive. You have collected a month’s worth of data that included travel time (y)/ minute and delivery distance (x)/miles. You want to know if you can use delivery distance to predict travel time. You run regression on excel, and get the following output....

Regulating a Monopoly Say you have a monopoly that provides a transportation service to a city....

Regulating a Monopoly Say you have a monopoly that provides a transportation service to a city. Total investment in infrastructure and busses amount to $65,000,000 The company sells tickets to riders for a fixed price- i.e. one monthly price for any length journey Monthly demand for tickets is P = 20.25 - .00005Q Where P = price of a ticket and Q the number of tickets TC = $4,625,000 + 30Q + .0003Q2 MC = 30 + .0006Q A) Without...

Regulating a Monopoly Say you have a monopoly that provides a transportation service to a city....

Regulating a Monopoly Say you have a monopoly that provides a transportation service to a city. Total investment in infrastructure and busses amounts to $65,000,000 The company sells tickets to riders for a fixed price- i.e. one monthly price for any length journey Monthly demand for tickets is P = 20.25 - .00005Q Where P = price of a ticket and Q the number of tickets TC = $4,625,000 + 30Q + .0003Q2 MC = 30 + .0006Q A) Without...

Dee Dee is the owner of a donair and pizza delivery service company, Donair Ltd. In...

Dee Dee is the owner of a donair and pizza delivery service company, Donair Ltd. In the second month of business, October 2019, a number of business activities took place. Two months of rent were pre-paid, on October 1, using cash $800, for October and November rent. • October 10: delivery services were provided for customers, on account, $2000. • October 12: Dee Dee registered for a business seminar, to be held in December. • October 13: Dee Dee purchased...

Dee Dee is the owner of a donair and pizza delivery service company, Donair Ltd. In...

Dee Dee is the owner of a donair and pizza delivery service company, Donair Ltd. In the second month of business, October 2019, a number of business activities took place. A. Write the journal entries, where appropriate, using correct journal entry format. Omit the explanations. Use SINGLE-SPACING in your MS Word document. • Two months of rent were pre-paid, on October 1, using cash $800, for October and November rent. • October 10: delivery services were provided for customers, on...

Subjects