Suppose a discriminating monopolist in selling a product in three separate markets whose demand functions are Q1 = 500 — P1, Q2 = 150 — 0.5P2 and Q3 = 75 — 0.5P3. If its cost function is given as TC = 70,000 — 100Q. As an economic adviser, determine the prices to be charged in the three markets and the amount of output to be sold in each market so that total profits can be maximised, henT compute the total profit made from this strategy of price discrimination
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Suppose a discriminating monopolist in selling a product in three separate markets
whose demand functions are
Q1 = 500 — P1, Q2 = 150 — 0.5P2 and Q3 = 75 — 0.5P3. If its cost function is given as TC = 70,000 — 100Q.
As an economic adviser, determine the prices to be charged in the three markets and the
amount of output to be sold in each market so that total profits can be maximised, henT
compute the total profit made from this strategy of
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- Assume that two companies (A and B) are duopolists that produce identical products. Demand for the products is given by the following linear demand functions:P=200-QA-QBwhere QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies areTCA = 1500+55 QA +QA2TCB = 1200+20 QB +2QB2Assume that the firms form a cartel and maximize total industry profits,a. Determine the optimal output and selling price for each firm.b. Determine Frim A, Firm B, and total industry profits at the optimal solution foundin part (a).c. Show that the marginal cost of the two firms are equal at the optimal solutionfound in part (a).Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:P = 200 - QA - QBwhere QA and QB are the quantities sold by the respective firms and P is the sellingprice. Total cost functions for the two companies areTCA = 1500 + 55QA + Q2ATCB = 1200 + 20QB + 2Q2BAssume that the firms act independently as in the Cournot model (i.e., each firmassumes that the other firm’s output will not change).a. Determine the long-run equilibrium output and selling price for each firm.b. Determine Firm A, Firm B, and total industry profits at the equilibrium solutionfound in Part (a).Suppose that the monopolist from Question 4 is now forced to charge the same price in both markets. Using thedemand functions and cost function from Question 4, what is the total inverse demand in this case? What is theprofit-maximizing price? What is the monopolist’s profit? (Question 4 = A monopolist is operating in two separate markets. The inverse demand functions for the two markets are P1 = 35 – 2.5Q_1 and P2 = 30 – 2Q_2. The monopolist’s total cost function is TC(Q) = 8 + 5(Q_1 + Q_2). Q_1 means Q subscript 1
- Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are: Q1 = 450 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.25P3 and Q4 = 80 – 0.4P4 Cost function is TC = 95,000 – 100Q. a. As an economic adviser, determine the Prices to be charged in the three markets and amount of output to be sold in each market so that total profits can be maximized. b.Calculate the total profit to be made from the strategy of price discrimination and clearly explain how this strategy has aided this monopolist.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"Suppose a monopoly market has a demand function in whichquantity demanded depends not only on market price (P) butalso on the amount of advertising the firm does (A, measuredin dollars). The specific form of this function isQ =(20 - P2) (1 + 0.1A - 0.01A2).The monopolistic firm’s cost function is given byC = 10Q + 15 + A.a. Suppose there is no advertising (A = 0). What outputwill the profit-maximizing firm choose? What market price will this yield? What will be the monopoly’sprofits?b. Now let the firm also choose its optimal level of advertising expenditure. In this situation, what output levelwill be chosen? What price will this yield? What will thelevel of advertising be? What are the firm’s profits in thiscase? Hint: This can be worked out most easily by assuming the monopoly chooses the profit-maximizing pricerather than quantity.
- 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=10-2/3Qand the inverse demand curve in country 2 is given byPW=18-QAssuming 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?Options are: a)p=1, q=16b) p=1 q=12c) p=4, q=8d)p=6, q=6Continuing to assume price discrimination, what is the equilibrium price and quantity of books sold by the monopolist in country 2?a)p= 4,q=14b)p= 6,q=12c)p= 8,q=10d)p= 10,q=8If 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?a)p=6,q=20b)p=7,q=20c)p=10,q=8d)p=12,q=6Consider a monopolist facing two consumers with the following two inverse demand functions: P=200-4Q1 and P=122- 6Q2. Assume that fixed costs are zero and that the marginal cost is equal to $8.a) Suppose the monopolist can differentiate between the two consumers. The monopolist decides to use a twoparttariff that permits both consumers to stay in the market. Solve for each consumer’s demand, fixed fee andmonopolist profits. b) Assume the monopolist cannot differentiate between the two consumers and hence cannot apply a two-parttariff. He decides to serve both consumers. Solve for the equilibrium aggregate demand and price in themarket, demand of each consumer and the monopolist profit.Consider a downstream monopolist producing a final good that requires two inputs in fixed proportions. Input 1 is produced by upstream monopolist U1 and input 2 is produced by upstream monopolist U2. Suppose that the demand function for the final product is linear and the marginal costs of production for the upstream producers and final producer (other than for the two inputs) are equal to zero. What is the effect of a merger between the two upstream producers? a) The merger reduces the quantity of the final product sold to consumers and the merged firm's profits. b) The merger reduces the quantity of the final product sold to consumers and increases the merged firm's profits c) The merger increases the quantity of the final product sold to consumers and the merged firm's profits. d) The merger increases the quantity of the final product sold to consumers and decreases the merged firm's profits. e) Cannot be determined given the information provided.
- Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact on the distribution of income. Since both monopolists and competitive firms follow the MR = MC rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference?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 reaction curve of oligopolists? b) What will be the production of each of the companies? c) What is the selling price practiced by oligopolists? d) What is the profit of each of the oligopolists? e) 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…BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MCMC), marginal revenue (MRMR), average total cost (ATCATC), and demand (D�) for beer in this market. On the following graph, place the black point (plus symbol) to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. If BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. Suppose that BYOB charges $2.50 per can. Your friend Felix says that since BYOB is a monopoly with market power, it should charge a higher price of $3.00 per can because this will increase BYOB's profit. Complete the following table to determine whether Felix is correct.…