Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Option 1- HELP ME DRAW THE GRAPHS FROM a), c), and h) Ampstand is a natural monopolist earning economic profits. (a) Draw a graph of
Option 1- HELP ME DRAW THE GRAPHS FROM a), c), and h) Ampstand is a natural monopolist earning economic profits. (a) Draw a graph of Ampstand, labeling the profit-maximizing price Pm, the profit-maximizing quantity Qm, and the allocationficient quantity Qso. Shade the area of deadweight loss. (b) If Ampstand is earning economic profits, why would other firms not enter the market? Explain. (c) The government decides to regulate Ampstand's price and follows a fair-return policy. On your graph from part (a), label this price PER and the new output quantity QFR. (d) If Ampstand's total revenue at PER changes to $100 million, what must its total cost be at this productive quantity? (e) Determine the output quantity from part (d) if PER is $10. The demand curve intersects the y- axis at $15. What is the consumer surplus with the government intervention? (f) How would the government action in part (c) affect the deadweight loss in Ampstand's market? (g) What would the government have to do to get Ampstand to produce at the socially optimal quantity and stay in the market in the long run? Explain. (h) Wattsit is a small firm that sells a complementary good to Ampstand's product in a perfectly competitive market. Assuming Wattsit was in long-run equilibrium, illustrate the short-run effect of the government intervention from part (e) on Wattsit's supply and demand in a separate graph. If Wattsit earns any economic profit or loss, shade it. (i) What happens to the demand for the inputs in the factor market required to produce Wattsit's good as a result of the changes in part (h)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started