a What is a natural monopoly What price yields the largest p

(a) What is a natural monopoly? What price yields the largest possible output consistent (b) How does a car salesperson practice price discrimination? How does the ability (c) Consider the following demand and cost functions for a monopoly cable television with the monopoly firm remaining in business? discriminate correctly affect his or her earnings? firm: P 28-0.0008Q and TC 120 000 0.0006Q2 where Q- the number of cable subscribers and P- the price of monthly cable service. What price and quantity would be expected if the firm is allowed to operate freely?

Solution

Ans for c

It s monopoly and operating freely

MR=MC

R=28Q-0.008Q^2

MR=28-0.0016Q

MC=0.0012Q

28=0.0028Q

Q=10000 units of cables will be produced and Price is 28-0.0008*1000=$20