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Monopoly in the Gas Market in Newland County

You may sketch the diagrams by hand or using a computer program, whichever you find most appropriate.
Where explanations are needed please make sure that they contain all the necessary information and are detailed.

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In a small county Newland, gas is supplied under license by two companies X and Y. Both companies have been in operation for a fairly long time.
(i) Draw a diagram showing the equilibrium price and output for company X, if the company assumes its rival will produce a given level of output.

Note: See the graph in the attached file.

(ii) Suppose that the government of Newland withdraws the license to operate from company Y. On your diagram show the new equilibrium price and quantity for company X in this case.

Note: See the graph in the attached file.

The figure shows the market for gas after the government of Newland withdraws the license to operate from company Y. Company X will now ...

Solution Summary

This solution of 493 words contains a brief analysis of the situation in a competitive market and monopoly in the gas business with graphs and comparisons of prices.

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