Explain why a monopolist, such as Media Cable, faces a downward-sloping demand curve
A monopolist faces a downward sloping demand curve, because as the price of a good or service increases, its quantity demanded decreases. It means, if demand of the good is not perfectly inelastic, demand curve is downward sloping. It is clear from above table also. As price declines, demand of cable service increases. So, demand is following law of demand.
2)
Why is the marginal revenue from an additional sale less than the price of the service?(Points : 8)
A monopolist chooses a price that maximizes difference between TR and TC. The price chosen by the monopolist is higher than MC. The monopolist is price setter. So, monopolist charges price higher than marginal revenue. Thus, MR from additional sale is less than the price of the service.
Suppose Media Cable currently charges $80 for its service. If it lowered the price to $40, how large is the price effect?
When price is $80, Media cable is selling 3 units
When price is lowered to $40, Media cable is selling 4 units.
Price effect is that Media Cable loses the amount by which it lowered the price each on selling 3 units that it was selling at price $80.
Media Cable lowered price by $80 - $40 = $40.
Price effect = $40*3 = $120
How large is the quantity effect?
Quantity effect is, Media cable is selling one more unit at $40.
So, quantity effect = 1*$40 = $40.
What is the profit maximizing quantity and price for Media Cable?
MC = $40
Profit is maximized at output level where MR = MC
Thus, at profit maximization level, MR = $40.
From table, profit maximization price = $80
Profit maximization quantity = 3 units
Dr.fine and dr.feelgood
Part A:
Table X
Part X:
Table B
Part C:
XXXXX X
XXXX X:
Table D
XXXXXXX the two XXXXXXX XXXX a XXX-shot game—XXXX is, they XXXXXXXX only XXXX XXX never again. XXXX will be the Nash (XXX-XXXXXXXXXXX) XXXXXXXXXXX in XXXX one-XXXX game?
If XX. Feelgood charges a low XXXXX, then Dr. XXXX XX better XXX XXXXXXXX the low price.
If Dr. XXXX charges the XXXX price, then XX. Feelgood is better XXX charging the low XXXXX. XXXX XX. XXXXXXXX XXXXX XXXXXX the low price irrespective XX XXX XXXXXX XXXXX by XX. XXXX.
XXXXX, symmetric XXXXXXX, we XXX XXX that Dr. XXXX XXX XXXXX XXXXXX the XXX price XXXXXXXXXXXX of XXX XXXXXX taken by Dr. Feelgood.
Hence the Nash XXXXXXXXXXX for this game XXXX XX when XXXX choose XX charge the low XXXXX.
The Nash (XXX-cooperative) XXXXXXXXXXX is for both XXXXXXX to XXXXXX the low price. XXXX XX. XXXX XXX a XXXXXXX it is XXXX XXX XX. Fine XX XXXXXX low XXXXXX XXX XXXX-versa.