2. (Market segment) In a monopoly market, the producer has a cost function of: C = 5+3q, there are two different types of consumers, they have different demand functions: p, = 15-qı, P2=25-2y2.| a. If the monopolist can conduct the third-degree price discrimination, i.e. he can charge different price to different types of consumers, what is the price he will charge on each market? What is the quantity sold on each market? What is the total profit? b. If the monopolist cannot conduct third degree price discrimination, i.e. he cannot distinguish between the consumers but decide to charge a single price, what is the price he will charge? What is the quantity sold? What is his profit in this case?

2. (Market segment) In a monopoly market, the producer has a cost function of: C = 5+3q, there are two different types of consumers, they have different demand functions: p, = 15-qı, P2=25-2y2.| a. If the monopolist can conduct the third-degree price discrimination, i.e. he can charge different price to different types of consumers, what is the price he will charge on each market? What is the quantity sold on each market? What is the total profit? b. If the monopolist cannot conduct third degree price discrimination, i.e. he cannot distinguish between the consumers but decide to charge a single price, what is the price he will charge? What is the quantity sold? What is his profit in this case?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

See similar textbooks

Similar questions

Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
What is the usual shape of a total revenue curve for a monopolist? Why?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium for such a market. b. Now suppose the demand for Hula Hoops shifts outward slightly. Show that, in general (contrary to the competitive case), it will not be possible to predict the effect of this shift in demand on the market price of Hula Hoops. c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.
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.
O OO The above graph shows the market demand function for a product. Assume that the market is served by a perfectly-price-discriminating monopolist with a constant marginal cost of production equal to $4 (MC = $4) and no fixed cost (FC = 0). The deadweight loss equals: DWL - $72 DWL - $0 DWL- -$48 DWL - $84 DWL-$36 $30 $28 $26 $24 $22 $20 Question 23 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
6. Curse Purge Plus is a monopolist in the curse removal market They face an inverse demand curve given by P=200-4Q, where Q is the number of curse removals they sell. Their cost function is C(Q)=10+8Q. d. Calculate the consumer surplus in the market at the monopoly price and quantity. e. If price were set equal to marginal cost, what would be the value of consumer surplus and profit? At the monopoly price and quantity, find the value of the deadweight loss.
A monopolist is faced with the following cost and revenue curves:(picture) a.What is the maximum-profit price and output,total revenue, total cost and profit? b.If the monopolist were ordered to produce 300 units, what would be the market price and how much profit would now be made c.If the monopolist were faced with the same demand, but average costs were constant at £60 per unit, what output would maximise profit? What would be the price now?................................................................................................. (j) How much profit would now be made? ................................................................................... (k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of £40. How much will now be sold? .................................................................................................................................................. (l) What is the marginal revenue at this…
Question 4 Think a price making firm (monopolist) with a downward-sloping demand curve is one with a price elasticity of demand equal to-1. This is illustrated in the following diagram. P=AR 20 Expenditure stays the same as price changes TR AR = = Q d (TR) dQ Slope = b/Q 40 100 Diagram 5 Unit elastic demand (Pe=-1) MR = As price and quantity change by the same proportion, total revenue is the same at each price (the TR curve is horizontal). This gives the following TR, AR and MR equations: TR=b b -D (AR) Q = 0 Q As TR is constant at all outputs, so MR must equal zero. In diagram 5, what is the value of b in equation TR=b?
7. A monopoly firm faces a demand curve given by 2(P) = 40 – 2p. The firm has constant MC=$12. (A) Find the firm's marginal revenue and use this to find the firm's profit-maximizing output and price. Draw a diagram. Hint: first figure out how express the firm's total revenue in terms of Q. Then if you know calculus, take the derivative of this expression with respect to Q to find marginal revenue. If you don't know calculus, recall that for a linear demand curve, (1) the slope of the marginal revenue curve is twice (in absolute value) the slope of the demand curve; and (2) the marginal revenue curve intersects the vertical (price) axis at the same point as the demand curve; and (3) the marginal revenue curve hits the quantity axis at half the distance of the demand curve. (B) Find the price elasticity of demand at the profit-maximizing output and price. Is demand elastic?
E3 Let’s assume a monopolist has the following inverse demand curve:p = 248 −3qand the following cost curve:T C = 8q + q^2(a) Calculate the marginal revenue and marginal cost for this firm.(b) Let’s assume the firm chose to operate in a perfectly competitive market. If that was true,what is the equilibrium price and quantity?(c) Graph the demand curve, marginal revenue, and marginal cost for the perfectly competitivemarket. Show the optimal quantity and price on the graph.(d) Calculate the consumer surplus, producer surplus, and deadweight loss in this market.(e) Now, let’s assume the firm chose to operate as a monopolist. If that was true, what is theequilibrium price and quantity?(f) Graph the demand curve, marginal revenue, and marginal cost for the monopolist market.Show the optimal quantity and price on the graph.(g) Calculate the consumer surplus, producer surplus, and deadweight loss in this market.