Monopolies 10-26

Monopolies 10-26 - If the company is only interested in...

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Pure Monopoly 1 Seller No close substitutes Many buyers Barriers to entry Natural Monopoly Cost characteristics: ATC 1. Large fixed costs MC 2. Relatively small marginal costs D Price Makers/Setters Monopoly MC Dead weight loss D MR - Profit maximizing price and quantity for this product? P- $7 Q- 3 -If this were a competitive market, what would be the market level of output and the market price? MR = MC P = MR, so P=MC @ Q = 4, P=$6
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-If the company were to build the bridge, what price should it charge per crossing in order to maximize its profit (or minimize its loss)? How many people would cross at this price?
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Unformatted text preview: If the company is only interested in maximizing profit, should it build the bridge? To max profits, you should charge P=$4, Q=400, profit is $1600-$2000 = -$400 Why or why not? -Given the information in the problem, what is the socially optimal price to charge percrossing? At this price, do the benefits of the bridge outweigh the costs? Explain. Does benefit of crossing outweigh the costs? Worth more than it costs...
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Monopolies 10-26 - If the company is only interested in...

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