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Unit 9 Assignment: Monopoly Pricing
General Instructions for all Assignments:
Insert your answers below, or in the appropriate space provided
for in the question. Your answers should follow APA 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 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 nonprofit sea turtle research and rehabilitation facility.
Table 1.
a. Complete Table 2. by computing the Total Revenue, Marginal
Revenue, and Profit columns.
Table 2
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 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:
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 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:
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?
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?
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_______________________
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