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Natural monopolist - profit maximizing price and quantity

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Suppose a natural monopolist has fixed costs of $24 and a constant marginal cost of $2. The demand
for the product is as follows:

Price (per unit) $10 $9 $8 $7 $6 $5 $4 $3 $2 $1

Quantity demanded
(units per day) 0 2 4 6 8 10 12 14 16 18

Under 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 = p )?
(b1) price _______
(b2) quanitity _______
(c) What price-output combination would exist with profit regulation (zero economic profits)?
(c1) price _______
(c2) quanitity _______

Illustrate your answers on the graph.

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https://brainmass.com/economics/general-equilibrium/natural-monopolist-profit-maximizing-price-and-quantity-365996

Solution Preview

See the attached file. Thanks

Price Quantity Total Revenue Marginal Revenue Fixed Cost Variable Cost Total Cost Marginal Cost Profit
$10.00 0 $0.00 $24.00 $- $24.00 ($24.00)
$9.50 1 $9.50 $9.00 $24.00 $2.00 $26.00 $2.00 ($16.50)
$9.00 2 $18.00 $8.00 $24.00 $4.00 $28.00 $2.00 ($10.00)
$8.50 3 $25.50 $7.00 $24.00 $6.00 $30.00 $2.00 ($4.50)
$8.00 4 $32.00 $6.00 $24.00 $8.00 $32.00 $2.00 $0.00
$7.50 5 $37.50 $5.00 $24.00 $10.00 $34.00 $2.00 $3.50
$7.00 6 $42.00 $4.00 $24.00 $12.00 $36.00 $2.00 $6.00
$6.50 ...

Solution Summary

This post calculates the profit maximizing price and quantity for a natural monopolist when the demand curve and cost curves are given. This post specifically shows how to calculate profit maximizing price and quantity when monopolist isn't regulated, with efficient pricing (MC = p ) and with profit regulation (zero economic profits)?

$2.19
See Also This Related BrainMass Solution

Natural Monopolist: Profit Maximizing Price and Output

From figure 12-5 referring to a natural monopolist, indicate:
a. The best level of output, price, and profits per unit and in total for the monopolist
b. The best level of output and price with a lump sum tax that would eliminate all the monopolist's profits
c. The best level of output, price, and profits per unit and in total with a $3 per unit tax collected from the monopolist
d. The best level of output and profit per unit and in total if the government sets the price of the product or service at $10
e. Which is the best method of controlling monopoly power. Why?

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