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:
XXXXX X
XXXX X:
Table B
Part C:
XXXXX C
Part D:
XXXXXXX the XXX XXXXXXX XXXX a XXX-XXXX XXXX&XXXXX;that is, XXXX interact XXXX XXXX XXX XXXXX again. XXXX XXXX be the XXXX (XXX-cooperative) equilibrium in this XXX-XXXX XXXX?
If XX. XXXXXXXX charges a XXX price, then XX. Fine XX XXXXXX off XXXXXXXX XXX low price.
XX Dr. XXXX XXXXXXX XXX XXXX price, XXXX Dr. Feelgood is better off charging XXX low price. XXXX Dr. XXXXXXXX XXXXX charge XXX low price XXXXXXXXXXXX of XXX action taken by Dr. XXXX.
XXXXX, symmetric payoffs, we can XXX that XX. Fine too would charge the XXX XXXXX irrespective of XXX action XXXXX by Dr. Feelgood.
Hence XXX XXXX equilibrium XXX this XXXX will XX XXXX XXXX XXXXXX to XXXXXX the low XXXXX.
The Nash (non-XXXXXXXXXXX) equilibrium is XXX XXXX Doctors XX XXXXXX the XXX price. When Dr. XXXX XXX a XXXXXXX it is XXXX XXX Dr. Fine to charge low XXXXXX and XXXX-XXXXX.