Is a monopoly with the following cost curve facing the following demand curve a natural monopoly?...

Is a monopoly with the following cost curve facing the following demand curve a natural monopoly?

P(Q)=100-5Q
C(Q) = 8,000 + 10 Q²

A.Yes

B. No

C. Cannot be determined from the information provided

Solutions

Expert Solution

Option B

A natural monopoly has a downward-sloping average total cost curve and the marginal cost curve is below it and also sloping downward.

Marginal cost is a change in the total cost and found by differentiation

The MC curve is upward sloping it means that the ATC curve is also upward sloping so the firm is not a natural monopoly.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Natural Monopoly: Suppose that PG&E is a natural monopoly. PG&E faces the following inverse demand curve...

Natural Monopoly: Suppose that PG&E is a natural monopoly. PG&E faces the following inverse demand curve for monthly demand for gas: P=260- 1/4Q. Suppose its marginal and average variable costs are a constant $10 per kilowatt hour. Find the profit maximizing quantity and price if this natural monopolist was not regulated Draw a graph for the monopolist, showing the demand curve, the marginal revenue curve, and the profit maximizing output and price Now suppose that the natural monopolist is regulated...

The schedule below gives the demand curve facing a monopoly firm.

The schedule below gives the demand curve facing a monopoly firm. Price Quantity Sold MR 8 0 7 1 6 2 5 3 4 4 3 5 2 6 1 7 Table 1: Demand schedule facing a monopoly (2.1) What is the marginal revenue for a perfectly price discriminating monopolist from the sale of each unit of output? (2.2) If the firm’s marginal cost is constant at $3.00, what is the...

Monopoly: Consider a monopoly firm facing a demand curve Q = 100– P. The marginal...

Monopoly: Consider a monopoly firm facing a demand curve Q = 100 – P. The marginal revenue curve is therefore MR= 100 – 2Q. This firm has fixed costs =$1000 and constant marginal cost =$20. Total costs are $1000 + $20Q and average costs are $1000/Q + $20. a. What is the firm’s profit maximizing level of output? What price does it charge to sell this amount of output? How much profit does it make? Show your work. b. Suppose...

Question : A monopoly market structure firm is facing the following demand curve Q = 1800...

Question : A monopoly market structure firm is facing the following demand curve Q = 1800 - 25P. Its short-run total cost is given by :100+7Q+0.025Q2. Find the following for this firm: a. His profit maximizing quantity, price and TR? b. If this firm want to incur an average selling cost of Rs 33 per unit will the firm face below, above or just normal profits?

Suppose that there is a natural monopoly that faces a demand curve D(P) = 10000 -...

Suppose that there is a natural monopoly that faces a demand curve D(P) = 10000 - 2P with the total cost function C(Q) = 1000 + 100Q. The profit maximizing quantity for the natural monopolist, in the presence of a marginal cost pricing rule is ______ units The profit maximizing price that will be set by the monopolist that will be set in the presence of a marginal cost pricing rule is $_______ The average total cost per unit at...

The Marginal Revenue curve facing a monopoly firm is a) identical to its demand and average...

The Marginal Revenue curve facing a monopoly firm is a) identical to its demand and average revenue curve. b) perfectly elastic. c) below its demand and average revenue curve. d) the same as it is for a perfectly competitive firm. For a firm in a perfectly competitive market a) The firm must decrease price if it wants to sell an additional unit of the product b) The demand curve is downward sloping c) Price = Average Revenue = Marginal Revenue...

Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve...

Consider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves. Suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. Complete the first row of the following table. Suppose that the government forces the monopolist to set the price equal to marginal cost. Complete the second row of the...

14. Consider a monopoly facing the following demand, marginal revenue, total cost, and marginal cost curves:...

14. Consider a monopoly facing the following demand, marginal revenue, total cost, and marginal cost curves: Demand curve: P = 12 – 0.002 Q Marginal revenue curve: MR = 12 – 0.004 Q Total cost curve: TC = 3Q +0.0005Q2 Marginal cost curve: MC = 3 + 0.001 Q a. Calculate the profit maximizing output of this monopoly. Briefly explain your answer. b. What is the socially efficient output level? Briefly explain your answer. c. Suppose the government wants to...

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a-...

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a- bq, and cost function C(q)= F + cq, where F denotes its fixed costs and c represents the monopolist's (constant) magical cost a>c 1. Graph demand, marginal revenue and marginal cost. Label your graph carefully, including intercepts 2. Solve the profit maximizing output q^m. To do this, first write down the expression for MR=MC and solve for the optimal quantity. Next find the price...

Exercise 1. Monopoly with Linear Costs facing a Linear Demand A monopoly has the cost function...

Exercise 1. Monopoly with Linear Costs facing a Linear Demand A monopoly has the cost function c(y)=10y+100, and is facing a market demand D(p)=100-2p. a) What is the inverse demand function, p(y)? Having profits be π = p(y)∙y – c(y), what is the profit maximizing output level? What is the corresponding market price? b) Calculate the monopolist’s profit and producer surplus. What is the consumer surplus? What is the deadweight loss? c) The government imposes a production tax, tP=10, so...

Subjects