The diagram shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20-year patent on its production. Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers. At its profit-maximizing level of output, it will generate a deadweight loss to society represented by what? O A. Area H+I OB. Area H+I+J+K OC. There is no deadweight loss generated. OD. Area D + E OE. It is not possible to determine with the information provided. Pol P₁ Price F H BG A EN K I Qo MR MC D Output Q Q G

The diagram shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20-year patent on its production. Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers. At its profit-maximizing level of output, it will generate a deadweight loss to society represented by what? O A. Area H+I OB. Area H+I+J+K OC. There is no deadweight loss generated. OD. Area D + E OE. It is not possible to determine with the information provided. Pol P₁ Price F H BG A EN K I Qo MR MC D Output Q Q G

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.3P

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If a monopolist with significant barriers to entry is making positive economic profit in the short run, what do we expect to happen as the market transitions to the long run? O The profit will increase since the monopolist has no competition, they can just raise the price to earn higher profits. O It will decrease as positive economic profit signals new firms to enter the market, increasing the market supply, and lowering the prevailing price. O It will increase, in the long run firms will drop out the market increasing the monopolists dominance in the marketplace. O The profit will stay the same, strong barriers to entry prevent new competition.
The diagram shows a pharmaceutical firm's demand curve and marginal cost curve for a new heart medication for which the firm holds a 20-year patent on its production. At its profit-maximizing level of output, it will generate a deadweight loss to society represented by what? O A. Area C+B+A+D B. There is no deadweight loss generated. C. Area C+ B D. Area B+ A+D E. It is not possible to determine with the information provided. C a Po P₁ P₂ Price I E O F GB A MC D Output Q N
The accompanying diagram shows demand, marginal revenue, and marginal cost of a monopolist. $120 MC 110 100 90 80 70 60 50 40 30 20 10 MR 0+ Quantity o i 2 3 4 s6i s 9 10 11 12 13 14 is a) Determine the profit-maximizing output and price. b) What price and output would prevail if this firm's product was sold by price-taking firms in a perfectly competitive market? c) Calculate the deadweight loss of this monopoly. d) Suppose MC increases. How would this affect monopoly price and quantity? e) Suppose market demand became less price elastic (hint: became flatter). How does this affect monopoly price and quantity?
Output D 1 2 3 4 5 Maple Choice O Refer to the demand and cost data for a pure monopolist given in the table if the monopolist perfectly price-descriminated and sold each unt of the product at the maximum price the buyer of that unit would be willing t pay, and if the monopolist maximized profits, then the total profit receved would be O 5820 $550 $1,500 Price $420 $900 380 340 300 260 220 Total Cost $250 260 290 350 500 600
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
Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1. a. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.b. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.c. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.
The accompanying diagram shows demand and long-run cost conditions in an industry. Price РО a a P1 P2 MC II Q0 LRATC MR LL Q1Q2 Output D ?
2. Acme Pharmaceutical Company discovers a vaccine that prevents the common cold and has a patent that grants it a monopoly on this drug. Acme has plants in both the North America and Europe and can manufacture the drug on either continent at a marginal cost of $10. Assume there are no fixed costs. In Europe, the demand for the drug is QE = 70 PE, where QE is the quantity demanded when the price in Europe is PE. In North America the demand for the drug is QN = 110 - PN, where QN is the quantity demanded when the price in North America is PN (a) Determine the aggregate demand function for the combined mar- ket. Determine the inverse demand function for the combined market and the inverse demand functions for each of the two mar- kets separately. (b) To begin, assume that it is illegal for the firm to price discriminate, so that it can charge only a single price P on both continents. What price will it charge, and what profits will it earn?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves? A. The profit-maximizing level of output can be determined by comparing marginal revenue and total cost. B. Cannot be determined from this information C. The profit-maximizing level of output will be where there is the greatest difference between total revenue and total cost. O D. The profit-maximizing level of output will be where there is the smallest difference between total revenue and total cost.
A monopolist faces the following demand curve: Price $10 $9 $8 $7 $6 $5 $4 $3 Quantity 5 Select one: O a. 31 units O b. 7 units O c. 16 units O d. 23 units 10 16 23 31 45 52 60 The monopolist has total fixed costs of $40 and a constant marginal cost of $5. What is the profit-maximizing level of output?
In a market where a monopolist can charge different prices to different groups, which of the following groups will likely be charged the lowest price?O a. the group for which the good is a necessityO b. the group for which the good makes up a large portion of income (big-ticket item)O c. the group for which the good has no good substitutesO d. the group for which the good makes up a small portion of income (small-ticket item)O e. The groups described in (a), (c), and (d) will all get charged a lower price than the group described in (b).