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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.

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Unit 9 AB224 | Microeconomics Unit 9 Assignment: Monopoly Pricing

 

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Course Number and Section: AB224?0X

 

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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 501(c) (3) 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 the video on a DVD and mailing the DVD is $6.58. In a GSTCG member meeting, the

 

video plan was discussed. Table 1. 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.

 

1 of 8 Unit 9 AB224 | Microeconomics

 

Table 1.

 

Suggested

 

Donation per

 

DVD Request Anticipated

 

Number of DVD

 

Requests $19.00 0 $15.00 2 $9.50 4 $7.75 10 $3.00 15 $0.00 20 a. Complete Table 2. by computing the Total Revenue, Marginal Revenue, and Profit

 

columns.

 

Table 2.

 

Suggested

 

Donation per

 

DVD Request Anticipated

 

Number of DVD

 

Requests $19.00 0 $15.00 2 $9.50 4 $7.75 10 $3.00 15 $0.00 20 Total

 

Revenue Marginal

 

Revenue PROFIT b. 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. c. 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

 

2 of 8 Unit 9 AB224 | Microeconomics how many people will receive the DVD if this becomes the price of the suggested donation?

 

Explain your answers. d. 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. e. The Fund Raising Committee wants the DVD program to generate as much profit in

 

donations as possible. What price is the Fund Raising Committee favoring and how many

 

people will receive the DVD if this becomes the price of the suggested donation? Explain

 

your answers. 2. A business has been created to provide needed services to its market. As the only provider of this

 

service, it functions as a monopoly, with the ability to set prices and having the entire market

 

demand schedule as its demand curve. Because the monopoly is newly formed, there is no

 

government intervention into the monopoly?s pricing actions. Examine Diagram 2. and answer each

 

of the following questions with complete explanations: 3 of 8 Unit 9 AB224 | Microeconomics a. What is quantity (a) and why is it important? b. What is the value at point (b) and why is it important? c. What is the value at point (c) and why is it important? d. What is the value at point (d) and why is it important? e. What is the meaning of the green rectangle labeled (e)? f. If there were no monopoly and this was a perfectly competitive market, what would quantity

 

at point (f) be and why is it important? g. If there were no monopoly and this was a perfectly competitive market, what would point (g)

 

be and why is it important? h. For the market in which the monopoly now operates, what does the red triangle labeled (h)

 

mean, and why is it important? 3. A governmental regulating agency was created to oversee the monopoly in Question 2?s operations

 

and pricing. Diagram 3. depicts a new price ceiling set by the regulators. Answer each of the

 

following questions with complete explanations: 4 of 8 Unit 9 AB224 | Microeconomics a. What is quantity (a) and why is it important? b. What is the value at point (b) and why is it important? c. At what level was the price ceiling set? d. What is the value at point (c) and why is it important? e. At this price ceiling level, will the monopoly make any monopoly profits? f. At this price ceiling level, will the monopoly cover its costs? g. At this price ceiling level, will the monopoly continue in business in the long run? 5 of 8 Unit 9 AB224 | Microeconomics 4. Diagram 4. depicts a different price ceiling set by the regulators for the monopoly in Question 2.

 

Answer each of the following questions with complete explanations: a. What is quantity (a) and why is it important? b. What is the value at point (b) and why is it important? c. At what level was the price ceiling set? d. At this price ceiling level, will the monopoly make any monopoly profits? e. At this price ceiling level, will the monopoly cover its costs?

 

6 of 8 Unit 9 AB224 | Microeconomics f. At this price ceiling level, will the monopoly continue in business in the long run? 5. Explain your understanding of how price effect contributes to the fact that, for a monopoly, marginal

 

revenue is always less than the price. 6. Explain your understanding of how quantity effect contributes to the fact that, for a monopoly,

 

marginal revenue is always less than the price. ------------------------------References: 7 of 8 Unit 9 AB224 | Microeconomics Unit 9 Assignment: Monopoly Pricing Grading Rubric:

 

Percent

 

Possible Points

 

Possible Full Assignment 100% 40 Overall Writing: 20% 8 Content Correct coversheet information at the top of 1st page 5% 2.00 APA format for answers 3% 1.20 Correct citations 3% 1.20 Standard English no errors 4% 1.60 At least one, or more, references 5% 2.00 Answers: provides complete information demonstrating

 

analysis and critical thinking: 80% 32 Individual Questions:

 

1. a. Computer TR, MR and Profit 5% 2.00 1. b. Most donations 3% 1.20 1. c. Most people get DVD's 3% 1.20 1. d. Most efficient price 4% 1.60 1. e. Most profit 3% 1.20 2. a.?h. Evaluate monopoly ? no price ceiling 16% 6.40 3. a.?g. Evaluate monopoly ? 1st price ceiling 14% 5.60 4. a.?f. Evaluate monopoly ? 2nd price ceiling 12% 4.80 5. Explain price effect and MR not equal price 10% 4.00 6. Explain quantity effect and MR not equal price 10% 4.00 80% 32 Sub-total for Individual Questions: 8 of 8

 







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