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Removal service is a profit-maximizing-competitive firm

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Reference no: EM132511431

a. Barney's snow removal service is a profit-maximizing, competitivefirm. Barney clears driveways for $10 each. His total cost each day is $250, and half of his total costs are fixed. If Barney clears 20 driveways a day, should he continue to operate or shutdown? If this situation persist into the long run, will Barney stay in the market?

b. Suppose that Comcast is the only provider of cable service in the city of Baytown, Texas. The following graph shows the monthly demand for cable services in Baytown and Comcast's marginal revenue and marginal cost curves. Use the graph to answer the following questions:

i. Imagine that you are an analyst at Comcast. What price would you recommend the company charge and why? At the price, how many customers would they have each month?

ii. Does the monopoly outcome result in an efficient outcome in this market? Provide a quick explanation why or why not.

iii. Now, imagine that you are a policy analyst tasked with finding a way to make cable more affordable for Baytown residents. In order to achieve an efficient outcome in this market, what price would the government require Comcast to charge?

Reference no: EM132511431

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