Monopolies

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3. Insert your answers below, or in the appropriate space provided for in the question. Your answers should follow APA 6th edition format with citations to your sources and, at the bottom of your last page, a list of references. Your answers should also be in Standard English with correct spelling, punctuation, grammar, and style (double-spaced, in Times New Roman, 12–point, and black font). Respond to questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions.

Assignment

In this Assignment, you will demonstrate your understanding of monopoly pricing, based on different management criteria, the impact of price regulation of monopolies, and provide detailed explanations of how price effect and quantity effect cause marginal revenue to be different from the price.

Questions

1. The Gulf Sea Turtle Conservation Group (GSTCG), a non–profit group of volunteers working to collect data on nesting sea turtles and to promote sea turtle conservation, is considering creating a video to educate people about sea turtle conservation. The cost of duplicating a video on a DVD and mailing the DVD is $5.56. In a GSTCG member meeting, the video plan was discussed.

The first two columns of Table 1 below shows the expected demand for the DVD at different suggested donation levels, and they can act as a single-price monopolist if they choose to. The receipts will be used to fund GSTCG supplies for their data collection and conservation work. At the end of each sea turtle nesting season, any excess funds are donated by the GSTCG to a local non-profit sea turtle research and rehabilitation facility.

5. Complete Table 1 by computing the Total Revenue, Marginal Revenue, Total Cost, and Profit columns, each rounded to two decimal places. The cost of duplicating a video on a DVD and mailing the DVD, the Marginal Cost, is $5.56. (1 point)

Table 1

Suggested Donation per DVD Request	Anticipated Number of DVD Requests	Total Revenue	Marginal Revenue	Total Cost	Profit
$19.00	0
$15.00	2
$9.50	5
$7.75	9
$3.00	15
$0.00	24

 

1. The President wants the GSTCG to provide videos to generate the most possible donations (Total Revenue). What price is the President of the GSTCG favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

 

1. The Education Outreach Committee wants the GSTCG to provide videos to the most possible number of people. What price is the Educational Outreach Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

 

1. The Treasurer of the GSTCG wants the DVD program to be as efficient as possible so that the marginal revenue equals marginal cost. What price is the Treasurer favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

 

1. The Fundraising Committee wants the DVD program to generate as much profit in donations as possible. What price is the Fundraising Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers.  (1 point)

 

2. Imagine an Island a short distance off the east coast of a country. This island is called Onus, and it has a population of about 500 residents. Their only way to the mainland is by the ONE ferry boat that runs between Onus and the mainland (the ferry operates as a monopoly).

 

Similarly, a short distance off the west coast of the same country is another island, Yuri, with a similar population of about 500 residents. Yuri, however, is a tourist attraction. There are MANY ferry boats running between Yuri and the mainland (each ferry operating in this perfectly competitive market). Each Yuri ferry operator provides service to both the tourists and to the 500 west coast island residents.

 

Using the information that you learned in Chapter 13 of the text, answer the following questions by comparing and contrasting the differences between the monopoly market in Onus and the perfectly competitive market in Yuri.

 

1. Explain in detail what differences in demand that the monopoly ferry operator on the east coast island of Onus will experience compared to the demand that a single ferry operator will experience in the perfectly competitive west coast market of Yuri. (2 points)

 

 

 

1. Both the Onus ferry operator in the monopoly market and each of the Yuri ferry operators in the perfectly competitive market will want to produce at the point that the marginal revenue is equal to the marginal cost. Explain in detail the two reasons that the monopoly’s marginal revenue will always be less than its price while the marginal revenue in the perfectly competitive market will always be equal to the market price. (2 points)

 

 

 

1. Explain in detail how the monopoly ferry operator will determine the quantity of ferry service that she will provide to the 500 residents of Onus. Also explain how that monopoly quantity will compare to the total quantity of ferry service available to the 500 residents of the perfectly competitive market of Yuri by ALL the Yuri ferry providers. (2 points)

 

 

 

1. Explain in detail how the monopoly ferry operator in Onus will determine the price she will charge the island residents for ferry service and how that price will differ from the price experienced by the island residents and tourists in the perfectly competitive market of Yuri. (2 points)

 

 

 

3. Onus residents, in questions 2.a.–d. above, complain to their local politicians about the high prices. In an attempt to reduce the exorbitant price that the residents must pay for ferry service to and from the mainland, the local politicians convince the legislature to create a regulatory board which will impose a legal price ceiling on the Onus monopoly ferry operator.

 

1. In this scenario, the regulatory board imposed a price ceiling on the Onus monopoly ferry operator that was calculated to be below the ferry operator’s lowest ATC, but well above its lowest AVC. Explain in significant detail, what will be the short run and long run impacts of such a price ceiling on the Onus monopoly ferry operator’s profits and continued ability to provide service to the inhabitants of the island of Onus. (4 points)

 

 

1. In this scenario, the regulatory board imposed a price ceiling on the Onus monopoly ferry operator that was calculated to be well above the ferry owner’s lowest AVC and equal to the ferry owner’s lowest ATC. Explain in significant detail, what will be the short run and long run impacts of such a price ceiling on the Onus monopoly ferry operator’s profits and continued ability to provide service to the inhabitants of the island of Onus. (3 points)

 

 

1. In this scenario, the regulatory board, imposed a price ceiling on the Onus ferry operator that was calculated to be well above the ferry owner’s lowest AVC and well above the ferry owner’s lowest ATC. Explain in significant detail, what will be the short run and long run impacts of such a price ceiling on the Onus monopoly ferry operator’s profits and continued ability to provide service to the inhabitants of the east coast island of Onus. (4 points)

 

 

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References:

 

Unit 9 Assignment: Monopolies	Possible Points	Points Earned
Overall Writing:	8
Used correct file name in uploading assignment document.	1
Demonstrated concerted effort to utilize material from the textbook, Learning Activities, and/or seminars to answer questions.	3
Correctly formatted in-text citations and listed at least ONE reference.	3
Used standard English with few or no grammatical errors.	1
Individual Questions:	32
1.a. Correctly calculated Total Revenue, Marginal Revenue, Total Cost, and Profit.	1
1.b. Correctly determined price to please President.	1
1.c. Correctly determined price to please Education Outreach Committee.	1
1.d. Correctly determined price to please Treasurer.	1
1.e. Correctly determined price to please Fund Raising Committee.	1
2.a. Correctly explained differences in demand between a monopoly firm and a perfectly competitive market firm.	2
2.b. Correctly explained how marginal revenue compares with price between a monopoly firm and a perfectly competitive market firm.	2
2.c. Correctly explained how quantity produced is determined between a monopoly firm and a perfectly competitive market firm.	2
2.d. Correctly explained how the price charged is determined between a monopoly firm and a perfectly competitive market firm.	2
3.a. Correctly explained impact of price floor below ATC.	4
3.b. Correctly explained impact of price floor equal to ATC.	3
3.c. Correctly explained impact of price floor above ATC.	4
Less points deducted for late submission
Total Points	40