1. T-Company is under investigation by the U.S. Justice Department for violating anti-trust laws. The government decides

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1 T Company Is Under Investigation By The U S Justice Department For Violating Anti Trust Laws The Government Decides 1 (303.76 KiB) Viewed 66 times

1. T-Company is under investigation by the U.S. Justice Department for violating anti-trust laws. The government decides that T- Company has a natural monopoly and that, if it is to keep the govemment business, it must sell at the price equal to marginal cost. T-Company says that it cannot do it and hires you to explain to the government why it cannot. You do so with reference to the graph below. $3.00 $2.50 Price $2.00 $1.60 $1.50 ATC $1.00 MO I $0.50 MR D $0.00 O Qm Qr Qc Quantity A) What price would the company charge if it were unregulated? B) Refer to the graph above and explain why the company cannot sell at the P=MC. C) What price would you advise the company should be allowed to charge if regulated? D) Why would you advise this specific price? 2. In 2015, the Rock and Roll Hall of Fame and Museum charged adults $28.85 for admission. Seniors and military services were charged $20.50, and children between 9 and 12 years old were charged $16.25. a) Based on the admission fee for adults, seniors and children, was the Rock and Roll Hall practicing price discrimination? If so, what type of price discrimination? b) Use the admission fee and rank these groups based on their elasticity of demand, from highest to lowest. c) When asked what was most valuable about the big data Disney collected form its Magic Bands program, the person in charged of the program stated:” The biggest value comes from being able to segment customers into better, smarter segments so you know what is going on and can act on those segments". Briefly explain the person reasoning. d) If a monopolist can identify individual demand of each buyer in the market for its product, what would be the best type of price discrimination to engage in? Why?