D. Short answer questions: a. Compare the monopoly’s price and quantity with that of a
perfectly competitive firm’s. Which is better for the consumer?
b. How can government regulation of a monopoly increase the
allocative efficiency of the monopoly?

Who is better at multi-tasking? in business, employees are often asked to perform a complex task when their atten-tion is divided (i.e., multi-tasking). human factors (may 2014) published a study designed to determine whether video game players are better than non–video game play-ers at multi-tasking. each in a sample of 60 college stu-dents was classified as a video game player or a non-player. participants entered a street crossing simulator and were asked to cross a busy street at an unsigned intersec-tion. the simulator was designed to have cars traveling at various high rates of speed in both directions. during the crossing, the students also performed a memory task as a distraction. two variables were measured for each student: (1) a street crossing performance score (measured out of 100 points) and (2) a memory task score (measured out of 20 points). the researchers found no differences in either the street crossing performance or memory task score of video game players and non-gamers. “these results,” say the researchers, “suggest that action video game players [and non-gamers] are equally susceptible to the costs of dividing attention in a complex task”

Consider the local telephone company, a natural monopoly. the following graph shows the monthly demand curve for phone services and the company’s marginal revenue (mr), marginal cost (mc), and average total cost (atc) curves. 0 2 4 6 8 10 12 14 16 18 20 100 90 80 70 60 50 40 30 20 10 0 price (dollars per subscription) quantity (thousands of subscriptions) d mr mc atc 8, 60 suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. complete the first row of the following table. pricing mechanism short run long-run decision quantity price profit (subscriptions) (dollars per subscription) profit maximization marginal-cost pricing average-cost pricing suppose that the government forces the monopolist to set the price equal to marginal cost. complete the second row of the previous table. suppose that the government forces the monopolist to set the price equal to average total cost. complete the third row of the previous table. under average-cost pricing, the government will raise the price of output whenever a firm’s costs increase, and lower the price whenever a firm’s costs decrease. over time, under the average-cost pricing policy, what will the local telephone company most likely do

Aquatic marine stores company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. aquatic uses standard costs to prepare its flexible budget. for the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: direct materials: 3 pounds per unit; $ 6 per pound direct labor: 4 hours per unit; $ 19 per hour during the first quarter, aquatic produced 5 comma 000 units of this product. actual direct materials and direct labor costs were $ 65 comma 000 and $ 330 comma 000, respectively. for the purpose of preparing the flexible budget, calculate the total standard direct materials cost at a production volume of 5 comma 000 units.