x
Info
x
Warning
x
Danger
 / 
 / 
 / 
9. Regulating a natural monopoly Consider the local cable company, a

Question : 9. Regulating a natural monopoly Consider the local cable company, a : 199428

9. Regulating a natural monopoly

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

Short Run

Suppose that the government forces the monopolist to set the price equal to marginal cost.

Complete the second row of the previous table.

Suppose that the government forces the monopolist to set the price equal to average total cost.

Complete the third row of the previous table.

True or False: Under the average-cost pricing policy, the cable company has no incentive to cut costs.

True

False

Pricing Mechanism

Short Run

Long-Run Decision

Quantity

Price

Profit

(Subscriptions)

(Dollars per subscription)

Profit Maximization

 

 

 

 

Marginal-Cost Pricing

 

 

 

 

Average-Cost Pricing

 

 

 

 

         

 

Solution
5 (1 Ratings )

Solved
Philosophy 1 Year Ago 370 Views
This Question has Been Answered!

Related Answers
Unlimited Access Free
Explore More than 2 Million+
  • Textbook Solutions
  • Flashcards
  • Homework Answers
  • Documents
Signup for Instant Access!
Ask an Expert
Our Experts can answer your tough homework and study questions
78437 Philosophy Questions Answered!
Post a Question