¹Consider a monopoly firm- firm 1 - which is choosing to invest in a new production facility. It hastwo choices:Facility Cost CapacitySmall, S $122 units at zero marginal costLarge, L $30 10 units at zero marginal costBoth choices put a capacity constraint on the amount that the firm can produce. The firm is lesscapacity constrained if it builds a larger facility; however, a larger facility also imposes a greater cost.The demand curve for firm 1 is:P = 12 - Q₁A. Suppose the monopoly firm does not face any threat of entry. Will the firm invest in a small ora large facility?

A capacity constraint refers to a difficulty or restriction at the most quantity of output that an…

Answered: monopoly firm

Business

Economics

monopoly firm

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter23: Monopoly

Section: Chapter Questions

Problem 2WNG

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A computer hardware firm sells both laptop computers and printers. Through the magic of focus groups, their pricing team determines that they have an equal number of three types of customers, and that these customers' reservation prices are as illustrated in the figure below. Bundle Laptop $700 $950 $600 Printer Customer A $100 $150 $50 $800 $1,100 $650 Customer B Customer C Assume for simplicity the marginal cost of production for laptops and printers is zero. If the firm were to charge only individual prices (not use the bundle price), what prices should it set for its laptops and printers to maximize profit? Assuming for simplicity that the firm has only one customers of each type, how much does it earn in total? To maximize profit using individual prices, the firm should charge a price for laptops of and a price for printers of p=: (Enter your responses as whole numbers.)
A computer hardware firm sells both laptop computers and printers. Through the magic of focus groups, their pricing team determines that they have an equal number of three types of customers, and that these customers' reservation prices are as illustrated in the figure below. Laptop $900 $1,000 $650 Bundle $1.000 $1,150 $700 Printer Customer A Customer B $100 $150 $50 Customer C Assume for simplicity the marginal cost of production for laptops and printers is zero. If the firm were to charge only individual prices (not use the bundle price), what prices should it set for its laptops and printers to maximize profit? Assuming for simplicity that the firm has only one customers of each type, how much does it earn in total? To maximize profit using individual prices, the firm should charge a price for laptops of p= and a price for printers of p=
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The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 10 V ATC The firm will receive $ MR Quantity/time The firm will maximize its profit at a quantity of▼ units. D Options: 6, 8, 9, or 10 After choosing the profit maximizing quantity, the firm will charge a price of in revenue at the profit-maximizing quantity. The total cost of production for this profit-maximizing quantity is $ The maximum profit the firm can earn in this situation is How will the situation change over time? Options: 6,8 10, or 24 per unit for this output. O Profits will attract rival firms into the market until the profit-maximizing price falls to the level of per-unit cost. O The market will adjust until the price charged by this firm no longer exceeds marginal cost at the profit-maximizing quantity. O This market is already in long-run equilibrium, and will not change throughout time. O Losses will induce firms to leave…
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