3. A monopolist can produce at constant average and marginal costs of AC = MC = 5. The firm faces a market demand curve given by Q = 55-P. (a) Calculate the profit-maximizing price-quantity combination for the monopolist. Also, calculate the monopolist's profits. Graph the relevant functions to illustrate these. (b) What output level would be produced by this industry under perfect competition (where price = marginal cost)? Indicate this on the graph. (c) Calculate the consumer surplus obtained by consumers in case (b). Show that this exceeds the sum of the monopolist's profits and the consumer surplus received in case (a). What is the value of the deadweight loss from monopolization? Indicate these on the graph

3. A monopolist can produce at constant average and marginal costs of AC = MC = 5. The firm faces a market demand curve given by Q = 55-P. (a) Calculate the profit-maximizing price-quantity combination for the monopolist. Also, calculate the monopolist's profits. Graph the relevant functions to illustrate these. (b) What output level would be produced by this industry under perfect competition (where price = marginal cost)? Indicate this on the graph. (c) Calculate the consumer surplus obtained by consumers in case (b). Show that this exceeds the sum of the monopolist's profits and the consumer surplus received in case (a). What is the value of the deadweight loss from monopolization? Indicate these on the graph

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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3. A monopolist faces a demand curve of P = 120 – 2q and has a production function given by f (L, K) = L'/4K¼. Input prices are w = 1 and r = 4. (a) Calculate the monopolist's (long-run) marginal cost as a function of the quantity it produces. (b) Draw a diagram illustrating the monopolist's problem. Identify each of the following on the diagram and calculate its numeric value: (i) monopolist's profit-maximizing quantity, (ii) price charged, (iii) monopolist's profit, (iv) consumer surplus, (v) producer surplus, and (vi) deadweight loss. Two notes: (1) the area of a triangle is base * height, (2) if you are getting really messy answers here, you may have made a mistake in part (a). (c) The government is concerned about the monopoly and decides to impose a price ceiling. Illustrate the efficient price ceiling on your diagram. i. Illustrate and calculate the price ceiling that will result in an efficient outcome. ii. Compute consumer and producer surplus at the efficient outcome. iii.…
5. A monopolist with cost function c(Q)=faces an inverse demand function given by P(Q)= √Q' (a) Find the elasticity of demand with respect to price. (b) Assuming that the monopolist uses MR = MC pricing rule, find his profit maximizing price, p", and output level, q". (c) Find the marginal cost at q" and calculate the Lerner index. (d) Does the monopolist's market power depend on his cost curve? In particu- lar, does it depend on a? Is your answer surprising?
A monopolist can produce at constant average and marginal costs of AC = MC = 5. The firm faces a market demand curve given by Q = 55 – P.(a) Calculate the profit-maximizing price-quantity combination for the monopolist. Also calculate the monopolist’s profits. Graph the relevant functions to illustrate these.(b) What output level would be produced by this industry under perfect competition (where price = marginal cost)? Indicate this on the graph.(c) Calculate the consumer surplus obtained by consumers in case (b). Show that this exceeds the sum of the monopolist’s profits and the consumer surplus received in case (a). What is the value of the deadweight loss from monopolisation? Indicate these on the graph. Please can you help with the graph, kind regards
QUESTION 3 A monopolist has a cost function of c(x) = x so that its marginal cost is constant at $1 per unit. It faces the following demand curve: D(p) = {100/p 100/p if p > 20 if p ≤ 20 A. What is the profit-maximizing choice of output/price for the monopolist? Graphically represent the monopoly market. B. If the government sets a price ceiling on the monopolist in order to force it to act as a competitor, what price should the government set? C. What output would the monopolist produce if forced to behave as a competitor? D. Based on the information in parts A - C, find the consumer-, producer-, and social surpluses before and after the government intervention.
d) If a price ceiling of $17.50 is imposed by the government on the monopolist, estimate (based on the graph) the quantity that the monopolist will produce. In this case, does the price ceiling in a monopoly improve economic efficiency or not? e) Supposed that instead of a regular monopoly, the graph above pertains to a natural monopoly, what change must be made to the graph to depict a natural monopoly?
1. A monopolist with zero cost, that is c(q) = 0, faces two consumers whose demand functions are given below. Q1 = 10-P Q2 (a) Suppose the monopolist cannot engage in any price discrimination. Find the firm's optimal pricing strategy. (b) Now, assume that price discrimination is possible. Find the monopolist's optimal first degree price-discrimination strategy. (c) Find the monopolist's optimal second degree price-discrimination strategy.
Please refer to the graph attached. The graph shows the Demand, Marginal Revenue, and Marginal Cost curves for a monopolist. (a) What would be the monopolist profit maximizing price and quantity? (b) If market was perfectly competitive what would be the equilibrium price and quantity? (c)Which area shows the total surplus under perfect competition?
2. A monopolist’s demand function is given by D(p) = 90 − 2p. This monopolist is facing a cost function, C(y) = (1/2)y2 + 600. (a) Is this a natural monopoly? Explain. (b) How can government regulate this monopolist to produce the efficient amount of products?
Question 2. A monopolist sells the same product at the same price into two different markets. The demand for the product in market #1 is denoted D₁ (p) = 30 - 2p where p is the unit price. The demand for the product in market #2 is given by D₂ (p) = 80 - 3p. (a) If the monopolist sets a price of $20 per unit, what is the total demand? (b) Explain why elasticity of total demand is not defined at a unit price of $15.
With regard to market structure, answer the following: (a) A monopolist never produces in the inelastic portion of its demand curve. True or false? Why? (b) Draw a figure showing a monopolist producing at the lowest point on its long-run average cost curve. (c) What is third degree price discrimination? Why does a monopolist practice it? What are the conditions are necessary for the monopolist to be able to practice it? Give a real-world example of third degree price discrimination? (c) If the price elasticity of demand is -3 in market 1 and -2 in market 2 and the price in market 1 is $12, what price should a monopolist practicing third degree price discrimination set in market 2?
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…
1. A Chinese steel producer has identified two markets. The first has a demand of q = 56 - p, the second of q = 24 - p. The cost function is C = 10+q². a) What is the profit maximizing price and output for the monopolist? You can assume that market segmentation is feasible. b)* Suppose now the monopolist's cost increases to C = 10 + 2q². How is your answer in a) affected? Discuss what happened