Quantity (8,000/15,000/16,000) Price (20/25/29/60) Profit (Negative/ Positive/ Z
ID: 1202354 • Letter: Q
Question
Quantity (8,000/15,000/16,000)
Price (20/25/29/60)
Profit (Negative/ Positive/ Zero)
Long Run (Exit the Industry/ Stay in business/ Stay or Exit)
Suppose that the government forces the 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.
Under average-cost pricing, the government will raise the price of output whenever a firm's costs increase, and lower the price whenever a firm's costs decrease. Over time, under the average-cost pricing policy, what will the local cable company most likely do?
Work to decrease its costs
Allow its costs to increase
Explanation / Answer
Pricing Mechanism Quantity Price Profit Long Run Decision
Profit maximization 8000 60 Positive Stay in Business
Marginal Cost Pricing 16,000 20 Zero Stay or Exit
Average Cost pricing 15,000 25 Negitive Exit
Allow its costs to increase
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