ECO101H1 Lecture Notes - Marginal Revenue
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Suppose that a monopoly firm finds that its MR is $72 for the first unit sold each day, $71 for the second unit sold each day, $70 for the third unit sold each day, and so on. Further suppose that the first worker hired produces 5 units per day, the second 4 units per day, the third 3 units per day, and so on.
Instructions: Enter your answers as whole numbers.
a. What is the firm's MRP for each of the first five workers?
Worker | MRP, unregulated |
1 | |
2 | |
3 | |
4 | |
5 |
b. Suppose that the monopolist is subjected to rate regulation and the regulator stipulates that it must charge exactly $62 per unit for all units sold. At that price, what is the firm's MRP for each of the first five workers?
Worker | MRP, regulated |
1 | |
2 | |
3 | |
4 | |
5 |
c. If the daily wage paid to workers is $258 per day, how many workers will the unregulated monopoly demand? Worker(s).
If the daily wage paid to workers is $258 per day, how many workers will the regulated monopoly demand? Worker(s).
Looking at those figures, will the regulated or the unregulated monopoly demand more workers at that wage? Unregulated/Regulated.
d. If the daily wage paid to workers falls to $121 per day, how many workers will the unregulated monopoly demand? Worker(s).
If the daily wage paid to workers falls to $121 per day, how many workers will the regulated monopoly demand? Worker(s).
Looking at those figures, will the regulated or the unregulated monopoly demand more workers at that wage? Unregulated/Regulated.
e. Comparing your answers to parts c and d, does regulating a monopoly's output price always increase its demand for resources? Yes/No.