Unit 9 Assignment: Monopolies

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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 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.

  1. 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)
  2. 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)
  3. 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)
  4. 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)
  5. 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)