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- Consider any market that has a demand curve given by: Qd = 240 - 2P. Where Qd is the total quantity demanded in the market, given in millions of units and P is the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market with Cmg = CVme = 15 and fixed monthly costs equal to 1,400. About this market, ask yourself: a) What is the profit of each of the oligopolists? b) Imagine that one of the companies managed to implement a process innovation capable of halving its Cmg and CVme, so that they would go from 15 to 7.5. This investment implies an additional monthly expense of $1,800. Discuss the statement: "If this situation occurs, the innovative company will not implement variable cost reduction, as the quantity supplied in the market will increase very little; prices will remain very close to what they are today and its profits will not increase"Consider the following information regarding a certain market: • The inverse demand function is given by P = a-bQ, with a, b > 0; • The monopolist's cost structure can be represented by TC (Q)=F+cQ, with F,c> 0; • The monopolist holds a license that grants it exclusive rights to sell this product in the country. a. How much will the monopolist produce? a-c 2b a-c 2(a-c) b What is the price that the firm will charge? ate PM = 2 PM = c-a PM = C PM = a-b(at) None of the others OQM- 0Q² = QM = OQM = arc b. None of the othersRef to the right-hand side graph to answer Q49 – Q50b. Price АТС 49. Suppose the monopolist represented in the diagram above produces positive output. (In other words, "no shutdown" and keep operating.) What is the price charged at the profit-maximizing/loss- minimizing output level? and cost per unit MC $75 68 63 A) $38 B) $54 C) $63 D) $68 E) $75 54 50. The monopolist profit (or loss) = $_ Note: Put “–" (minus) sign if the monopolist is losing money. 38 'Demand 50b. On the right-hand side graph, neatly shade a rectangle or triangle area that represents this monopolist's profit (or loss). 630 800 Quantity 880 850 MR
- 8. A monopolist with cost function c(q) = q faces two consumers whose demand functions are given below. Q₁ = 100-P 50-P Q₂ (a) Suppose the monopolist is a uniform pricing firm (i.e.the monopolist can- not engage in any price discrimination). Find the firm's optimal pricing strategy. Calculate the firm's Lerner index. (b) What is the deadweight loss associated with this pricing strategy, if any? (c) Now, assume that price discrimination is possible. Find the monopolist's optimal second degree price-discrimination strategy. (d) Find the monopolist's optimal third degree price-discrimination strategy.Q1) Suppose that the inverse demand for a product is represented by the equation P = 50 – Q, where P is the price in Euros and Q is the annual output. Suppose that only one firm produces this product and that the marginal and average cost is €10. Calculate the profit-maximising price for this monopolist. Q2) In autumn, Erling Kagge, who lives alone on an island near the North Pole, puts 50 bags of root vegetables from his harvest into a cave just before a family of polar bears goes in to hibernate. The polar bears do not eat vegetables but would attack Kagge if he approached them. As a result, he is unable to get the vegetables out before the polar bears emerge the following spring. The vegetables spoil at the same rate no matter where he stores them. Which of the following statements best describes this behaviour? A. Kagge’s behaviour is an example of the anchoring effect in action B. Kagge’s behaviour is an example of the framing effect in action C. Kagge’s…A monopolist faces a market demand curve given by Q(p) = 70 – p. Its total costs are described by TC(Q) = 3ố0 Q³ – 5Q + 250. 1 a) Derive the monopoly price, quantity, and profits. b) Calculate Lerner Index under the monopoly equilibrium. c) Now suppose the government sets the maximum price at $40. What output level and price level will the monopolist choose to maximize profits? What is the deadweight loss? d) Suppose the government sets the maximum price at $30. What output level and price level will the monopolist choose to maximize profits? What is the deadweight loss?
- Exercise 4.2 "With respect to the monopoly equilibrium without price discrimination, first-degree price discrimination increases the profit of the enterprise at the expense of reducing social welfare." Do you agree with this statement? Reason your answer and represent graphically.2. A market analysis employed by the "Sad Student Company" reveals that the number of lots of the game named "Handsome Killer: Revenge of the Teacher" ordered by the wholesalers when the game is offered at a price of dollars per lot is given by the formula: p=1500 – 2.5q a) Find the company's total, marginal and average revenues b) Find the price and quantity maximizing the total revenue by first expressing the revenue as a function of price rather than of quantityQuestion 8 Firm D is a monopolist that faces a market with inverse demand given by: P = 120-4Q Where Q is Firm D's output level. Firm D's total cost function is given by: TC(Q) = 11Q +42 Assuming that Firm D can perfectly (1st degree) price discriminate, what is Firm D's profit maximizing output level, Q*? (Hint: Because Firm D can perfectly price discriminate, its Marginal Revenue function is equivalent to inverse demand).
- c)If this profit maximizing monopolist charges each consumer the same price, how much deadweight loss (DWL) will be created? By contrast, if the monopolists charges a perfect price discrimination, how much DWL results?9. A monopolist produces a good at a constant marginal cost of 4. Suppose the monopolist is able to practice first-degree price discrimination (FDPD). The (in- verse) market demand function for the good is given by P=10-bQ where P is price, Q is quantity and b> 0 is a constant. Let DL(Q) denote the deadweight loss at quantity Q, and let CS(Q) denote the consumer surplus at Q. (a) Under FDPD, the marginal revenue function of the monopolist is the same as the market demand function. Is this true or false? Explain carefully.A monopolist book publisher with a constant marginal cost of 2 and no fixed costs sells novels in only two countries. Assume the inverse demand curve in country 1 is given by P₁ = 10-Q and the inverse demand curve in country 2 is given by P₂ = 18-Q Assuming book shipments across countries are banned so that price discrimination occurs. What is the equilibrium price and quantity of books sold by the monopolist in country 1? Continuing to assume price discrimination, what is the equilibrium price and quantity of books sold by the monopolist in country 2? If book imports are permitted in both countries so that price discrimination is impossible, what is the equilibrium price and quantity sold in the two countries combined? P=1, Q=16 P=1, Q=12 P=4, Q=8 11 P=6, Q=6 P=4. Q=14 P=6, Q=12 P=8, Q=10 P=10, Q=8 P=6, Q=20 P=7, Q=20 P=10, Q=8 P=12, Q=6
