OneClass: Chapter 14 / MONOPOLYSuppose that Media Cable is a single-price monopolist in the market fo...

Question 4.4.

Answer the following questions based on the following information. Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.

Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morganï¿½s willingness to pay is $130; Larryï¿½s, $100; Clydaï¿½s, $80; Janetï¿½s, $40; and Tomï¿½s, $0.

Media Cableï¿½s marginal cost per cable package is $40. The accompanying table shows Media Cableï¿½s demand schedule: Total Revenue and Marginal Revenue at each price level.

Price of Cable Service	Qty of Cable Service demanded	Total Revenue	Marginal Revenue
$160	0	0	-
130	1	$130	$130
100	2	$200	$70
80	3	$240	$40
40	4	$160	- $80
0	5	0	- $160

Suppose Media Cable currently charges $80 for its service. If it lowered the price to $40, how large is the quantity effect? (Points : 8)

$200
$160
$120
$70
$40

Question 5.5.

Answer the following questions based on the following information. Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.

Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morganï¿½s willingness to pay is $130; Larryï¿½s, $100; Clydaï¿½s, $80; Janetï¿½s, $40; and Tomï¿½s, $0.

Media Cableï¿½s marginal cost per cable package is $40. The accompanying table shows Media Cableï¿½s demand schedule: Total Revenue and Marginal Revenue at each price level.

Price of Cable Service	Qty of Cable Service demanded	Total Revenue	Marginal Revenue
$160	0	0	-
130	1	$130	$130
100	2	$200	$70
80	3	$240	$40
40	4	$160	- $80
0	5	0	- $160

What is the profit maximizing quantity and price for Media Cable? (Points : 8)

1 at $130
2 at $100
3 at $80
4 at $40
5 at $0

Question 2.2.

Answer the following questions based on the following information. Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.

Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morganï¿½s willingness to pay is $130; Larryï¿½s, $100; Clydaï¿½s, $80; Janetï¿½s, $40; and Tomï¿½s, $0.

Media Cableï¿½s marginal cost per cable package is $40. The accompanying table shows Media Cableï¿½s demand schedule: Total Revenue and Marginal Revenue at each price level.

Price of Cable Service	Qty of Cable Service demanded	Total Revenue	Marginal Revenue
$160	0	0	-
130	1	$130	$130
100	2	$200	$70
80	3	$240	$40
40	4	$160	- $80
0	5	0	- $160

Why is the marginal revenue from an additional sale less than the price of the service? (Points : 8)

Lowering the price means that Media Cable lowers the price on all cable packages sold, and that lowers its total revenue.
a. Marginal revenue is calculated by finding the change in total revenue or the change in quantity.
b. The higher the quantity the lower the sale price.
c. When the average falls, the marginal revenue also falls.
d. It costs less to provide a service in bulk.

Question 3.3.

Answer the following questions based on the following information. Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.

Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morganï¿½s willingness to pay is $130; Larryï¿½s, $100; Clydaï¿½s, $80; Janetï¿½s, $40; and Tomï¿½s, $0.

Media Cableï¿½s marginal cost per cable package is $40. The accompanying table shows Media Cableï¿½s demand schedule: Total Revenue and Marginal Revenue at each price level.

Price of Cable Service	Qty of Cable Service demanded	Total Revenue	Marginal Revenue
$160	0	0	-
130	1	$130	$130
100	2	$200	$70
80	3	$240	$40
40	4	$160	- $80
0	5	0	- $160

Suppose Media Cable currently charges $80 for its service. If it lowered the price to $40, how large is the price effect? (Points : 8)

a. $200
b. $160
c. $120
d. $70
e. $40

Suppose that De Beers is a single-price monopolist in the marketfor diamonds. De Beers has five potential customers: Raquel,Jackie, Joan, Mia, and Sophia.

Each of these customers will buy at most one diamondâand only ifthe price is just equal to, or lower than, her willingness to pay.Raquelâs willingness to pay is $400; Jackieâs, $300; Joanâs, $200;Miaâs, $100; and Sophiaâs, $0.

De Beersâ marginal cost per diamond is $100. The demand schedulefor diamonds is shown in the accompanying table.

Price of Diamond ||| Qty. of Diamonds Demanded
$500................ ||| 0
$400................ ||| 1
$300................ ||| 2
$200................ ||| 3
$100................ ||| 4
$0................... ||| 5
a. Calculate De Beersâ total revenue and its marginalrevenue.

Price of diamond|Qty of diam. demanded|Total Rev.|MarginalRev.
$500...............| 0 ......................|............|--
400................| 1
300................| 2
200................| 3
100................| 4
0...................| 5

From your calculation, draw the demand curve and the marginalrevenue curve. Please see letter "e".....marginal cost curve needsto be added to the graph of this.

b. Explain why De Beers faces a downward-sloping demandcurve.

c. Explain why the marginal revenue from an additional diamond saleis less than the price of the diamond.

d. Suppose De Beers currently charges $200 for its diamonds.
If it lowered the price to $100, how large is the priceeffect?

How large is the quantity effect?

e. Add the marginal cost curve to your diagram from part a.

â¦ and determine which quantity maximizes De Beersâs profit andwhich price De Beers will charge.

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