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Homework answers / question archive / Table 1 below shows the demand curve facing a monopolist firm for the Malaysian water supply industry

Table 1 below shows the demand curve facing a monopolist firm for the Malaysian water supply industry

Economics

Table 1 below shows the demand curve facing a monopolist firm for the Malaysian water supply industry. The monopolist firm produces output at a constant marginal cost (MC) of RM10.

Price (RM)

Quantity

27

0

24

2

21

4

18

6

15

8

12

10

9

12

6

14

3

16

0

18

Table 1

  1. With the assumption that the firm is a monopolist, calculate the firm’s marginal revenue (MR) curve for this firm. Show the calculation. Diagram is NOT required.              (5 marks)

 

  1. Calculate and explain the firm’s profit-maximizing output and price? What is the amount of profit for this firm at this level? You need to show the calculation. Diagram is NOT required                                                                                                                      (5 marks)

 

  1. Discuss what would the equilibrium price and quantity level for this firm if the firm is operating in a competitive industry? Diagram is NOT required.                            (5 marks)

 

  1. Critically discuss what would the social gain be if this monopolist were forced to produce and price at the competitive equilibrium? Who would gain and lose as a result from this situation? Draw only ONE diagram.                                                                        (8 marks)

 

  1. Discuss THREE (3) social costs from monopoly power and how the social cost can be redistributed to eliminate the monopoly power in water supply industry. Draw only ONE diagram.                                                                                                                      (7 marks)

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