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.Pricing MechanismProfit MaximizationMarginal-Cost PricingAverage-Cost PricingSuppose that the governmentShort RunQuantityPrice(Subscriptions) (Dollars per subscription)True6,000O False10,40012,000ProfitComplete the second row of the previous table.Suppose that the government forces the monopolist to set the price equal to average total cost.monopolist to set the price equal to marginal cost.Complete the third row of the previous table.True or False: Over time, the telephone company has a very strong incentive to lower costs when subject to average-cost pricing regulations.Long-Run Decision 7. Regulating a natural monopolyConsider the local telephone company, a natural monopoly. The following graph shows the monthly demand curve for phone services, the company'smarginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves.PRICE (Dollars per subscription)10090228 22880706050403020100.026, 34IMR468 10 12 14QUANTITY (Thousands of subscriptions)16DATCMC1820?

A natural monopoly is a monopoly in an industry wherein high infrastructural costs and different…

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.. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Suppose that the government f 6,000 10,400 + 12,000 False Profit 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. Long-Run Decision True or False: Over time, the telephone company has a very strong incentive to lower costs when subject to average-cost pricing regulations. O True

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.. Pricing Mechanism Profit Maximization Marginal-Cost Pricing Average-Cost Pricing Short Run Price Quantity (Subscriptions) (Dollars per subscription) Suppose that the government f 6,000 10,400 + 12,000 False Profit 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. Long-Run Decision True or False: Over time, the telephone company has a very strong incentive to lower costs when subject to average-cost pricing regulations. O True

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Monopoly

Section: Chapter Questions

Problem 1CQQ

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