1. Natural MonopolyGiven the inverse supply and inverse demand equation below,1PD3D + 40Ps= -5QD + 30a. Find the equilibrium without any government intervention(Q* = 21.4, P* = 32.9)b. If the market is to be regulated, find the minimum subsidy toget an optimal equilibrium (562.5)2. Two sided biddingThese are the list of bids from electricity producers as wellelectricity distribution firms.Electricity producersElectricity distributionAsking price/KWh quantity/KWh Asking price/KWh quantity/KWh25$35$$$$$0.770.360.480.550.6835353040SSSS0.500.380.570.680.4460201540a. Find the optimal market price and quantity (P* = 48 to 50, Q*= 70)b. Find the total welfare3. Peak-load pricingGiven the following peak demand and off peak demand,Qpeak = -Pp + 120Qoffpeak = -2PD + 60a. If the operational cost for off peak and peak period is $5 andthe capital cost is $50, find the optimal pricing mechanism!(PPeak = $55, Poffpeak = $5)b. If the capital cost is $70 instead of $50, find the optimalpricing mechanism! (PPeak = $73.3, Poffpak = $6.66)

1. Natural Monopoly Given the inverse supply and inverse demand equation below, PD=-=- 3D QD + 40 Ps= -5QD+30 a. Find the equilibrium without any government intervention (Q* = 21.4, P* = 32.9) b. If the market is to be regulated, find the minimum subsidy to get an optimal equilibrium (562.5)

1. Natural Monopoly Given the inverse supply and inverse demand equation below, PD=-=- 3D QD + 40 Ps= -5QD+30 a. Find the equilibrium without any government intervention (Q* = 21.4, P* = 32.9) b. If the market is to be regulated, find the minimum subsidy to get an optimal equilibrium (562.5)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.6P

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1. Natural Monopoly Given the inverse supply and inverse demand equation below, 1 -30D + 40 1 Ps= -5QD+30 a. Find the equilibrium without any government intervention (Q* = 21.4, P = 32.9) b. If the market is to be regulated, find the minimum subsidy to get an optimal equilibrium (562.5) 2. Two sided bidding These are the list of bids from electricity producers as well as electricity distribution firms. Electricity producers Electricity distribution Asking price/KWh quantity/KWh Asking price/KWh quantity/KWh 25 35 35 60 35 20 30 15 40 40 $ $ $ $ $ PD = - 0.77 0.36 0.48 0.55 0.68 $ $ $ S $ 0.50 0.38 0.57 0.68 0.44 a. Find the optimal market price and quantity (P* = 48 to 50, Q* = 70) b. Find the total welfare 3. Peak-load pricing Given the following peak demand and off peak demand, Qpeak-PD + 120 Qoffpeak = -2PD + 60 a. If the operational cost for off peak and peak period is $5 and the capital cost is $50, find the optimal pricing mechanism! (PPeak = $55, Poffpeak = $5) b. If the capital…
A monopoly produces a good with a network externality at a constant marginal and average cost of c-$2. In the first period, its inverse demand curve is ← p10-10 in the second period, its inverse demand curve is p-10-10 unless it sels at least Q 8 units in the first period. If it meets or exceeds this target, then the demand curve rotates out by a (t sells a times as many units for any given price), so that its inverse demand curve is The monopoly knows that it can sell no output after the second period. The monopoly's objective is to maximize the sum of its profits over the two periods. For what values of it would the monopoly earn a higher two-period profit by setting a lower price in the first period? Ifa is greater than (round your answer to two decimal places)
Assume integer quantities. The firm is a monopoly. The table below shows the demand schedule it faces, as well as its marginal cost of production. The production of the good creates a marginal external benefit equal to $19. 1 3 5 MWTP $35 $29 $24 $18 $11 $6 $1 MC $2.50 $3.50 $6.50 $8.50 $13.50 If the monopoly engages in perfect first-degree price discrimination, what is the marginal $10.50 $12.50 revenue of unit number 2? Round to two decimal places and do not enter the currency symbol. If your answer is $1.125, enter 1.13.
3. Consider a monopolist who faces the following demand: Demand: P= 100 – 10Q MC= 50+20 a) Find the price quantity combination that maximizes profit for the monopolist. b) Is the firm making positive, negative or zero profits? (100,100) Kareem chooses (60, 105) (500, 400) Saleem chooses Kareem chooses (50,420) 4. Calculate the SPNE/SPNES for the game stated above.
2:03 D 19 ll 37% Marked out of 30 P Flag question Suppose you are a manager of a County government project that is meant to provide rent-regulated housing units in low-income settlements. Using your knowledge of equilibrium, advice the Governor whether this policy will be a а. success. A Monopolist producing and supplying cooking gas to Mombasa city faces the demand b. function. = 8800 – 20P. Its cost function is given by TC = 20Q + 0.05Qʻ. Determine the quantity of cooking gas she will produce and the price she will charge to maximize profits and determine her profit. i. i. Explain how her profits she will affected if regulators forced her to operate like a perfectly competitive firm. ii. Illustrate and compute dead-weight loss and lost consumer surplus associated with her Monopoly operations. B I II II !!!
In British Columbia, Canada a company named after Tim Hortons runs a monopoly on a sweet snack called Timbits! Suppose the demand for Timbits is P=90-Q and the cost function is C-Q How much would the consumer surplus, producer surplus and DWL be in case Tim Hortons a single-price monopoly? Suppose Tim Hortons could install a device in its premises that could immediately 11) predict the willingness to pay of every unsuspecting customer entering its franchise premises and charge them that corresponding amount! Additionally, suppose they could also stop resale of products, and thus become a first degree price discriminatıng monopoly. How much would the consumer surplus, producer surplus and DWL be in this case?
The following graph shows the demand (D) for cable services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. (? 100 90 Monopoly Outcome 80 70 60 50 40 ATC 30 MC 20 10 MR D 2 6 8 10 12 14 16 18 20 QUANTITY (Number of subscriptions) Which of the following statements are true about this natural monopoly? Check all that apply. O In order for a monopoly to exist in this case, the government must have intervened and created it. O The cable company is experiencing diseconomies of scale. O The cable company is experiencing economies of scale. O It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government…
QUESTION 7 A monopolist produces a good with a constant marginal cost of c= 10 and fixed cost of F = 1000. Demand for the product is given by D(p) = 90-p. The firm could be subjected to price regulation that enforces marginal cost prices and subsidises any losses of the company. Suppose the regulator's objective is to maximise the difference between total welfare and the cost of subsidies allocated to the company. Assume the social cost of subsidies S are 3.5 where 8 20. Which of the following statements is correct? The unregulated monopoly price is 40 and price regulation is optimal for any ≤ 4/5. The unregulated monopoly price is 50 and price regulation is optimal for any ≤ 2/5. The unregulated monopoly price is 50 and price regulation is optimal for any ≤ 4/5. The unregulated monopoly price is 40 and price regulation is optimal for any ≤ 2/5. O None of the above.
QUESTION 7 A monopolist produces a good with a constant marginal cost of c = 10 and fixed cost of F = 1000. Demand for the product is given by D(p) = 90 - p. The firm could be subjected to price regulation that enforces marginal cost prices and subsidises any losses of the company. Suppose the regulator's objective is to maximise the difference between total welfare and the cost of subsidies allocated to the company. Assume the social cost of subsidies St are BS where ß > 0. Which of the following statements is correct? O The unregulated monopoly price is 40 and price regulation is optimal for any B 4/5. O The unregulated monopoly price is 50 and price regulation is optimal for any ≤ 2/5. O The unregulated monopoly price is 50 and price regulation is optimal for any B < 4/5. O The unregulated monopoly price is 40 and price regulation is optimal for any B≤ 2/5. O None of the above.
Question 3: Monopoly Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P = 1000 – 10Q, 1000Q – 10Q² = 1000 – 20Q Total reveпие:TR 3 Marginal Revenue:MR Marginal Cost: MC = 100 +10Q where Q indicates the number of copies sold and P is the price in Ectenian dollars. a. Find the price and quantity that maximize the company's profit. b. Find the price and quantity that would maximize social welfare. c. Calculate the deadweight loss from monopoly. d. Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options: i. a flat fee of 2,000 Ectenian dollars. ii. 50 percent of the profits. iii. 150 Ectenian dollars per unit sold. iv. 50 percent of the revenue. For each option, calculate the profit-maximizing price and quantity. Which, if any, of these compensation schemes would alter the deadweight loss from monopoly? Explain.
Suppose that a monopoly produces good x, demand is given by = 20P, and marginal cost (MC) is constant and equal to 8. a. Graph MC, MR, and demand in the space below b. What is the dollar value of deadweight loss in this market? Show deadweight loss in the space below. 16 14 12 10 8 6 4 2 2 4 6 .∞0 8 10 12 14 16
Suppose a local cable company provides cable service to a rural community. The figure to the right illustrates the cable company's marginal cost of providing cable service along with the community's demand for cable TV. Assume the local cable company is a monopoly. When the company maximizes profits, consumer surplus equals $ 450 (enter a numeric response using a real number rounded to one decimal place), and producer surplus equals Price and cost (dollars per cable subscription) 120- 110- 100- 90- 80- 70- 60- 50- 40- 30- 20- 10- 0 10 20 30 MR 40 50 D 60 70 80 MC 90 100