PROBLEMS FOR CHAPTER 26 Name: economics 20 QUANTITY (units per day) PRICE OR COST (dollars per unit) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19…
PROBLEMS FOR CHAPTER 26 Name: economics20QUANTITY (units per day)PRICE OR COST (dollars per unit)1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1912345678910$111. In Figure 26.2 ,(a) How much profit does an unregulated monopolist earn?(b) How much profit would be earned if MC pricing were imposed?2. Do total profits (A) decrease, (B) increase, or (C) stay the same when new technology reduces averagetotal costs (shifts ATC downward in Figure 26.2 ) in(a) An unregulated natural monopoly?(b) A price-regulated natural monopoly?(c) A profit-regulated natural monopoly?3. Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demandfor the product is as follows:Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1Quantity demanded(units per day) 0 2 4 6 8 10 12 14 16 18Under these conditions,(a) What price and quantity will prevail if the monopolist isn’t regulated? (a1) price(a2) quantity(b) What price-output combination would exist with efficient pricing (MC 5 p )? (b1) price(b2) quantity(c) What price-output combination would exist with profit regulation (zero economic (c1) priceprofits)? (c2) quantityIllustrate your answers on the graph below.
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