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- True/False 1. In a principal-agent relationship between owner and manager with hidden e§ort, the owner can design a wage scheme that insures the optimal Örst best e§ort by the manager regardless of the risk aversion of the manager. Justify your answer. 2. Consider a monopoly that faces an inverse demand curve and has a linear cost function. The monopoly would be indi§erent when maximizing proÖts between either choosing quantities or choosing prices. 3. A multiproduct Örm that as monopoly power over several products sets lower prices than separate Örms (each controlling a single product) when the products are substitutes or when there are economies of scope. 4. In the dominant Örm model (‡ la Hotelling) an increase in the marginal cost of the dominant Örm (with constant marginal costs) implies that proÖts necessarily decrease. 5. Suppose that an industry has 10 Örms where the market shares are ordered from the most to the least dominant Örm f0:5; 0:37; 0:05; 0:03; 0:02; 0:01;…ASAP PLZ Suppose a monopolist knows it has two types of customers. The inverse demand for the customers in the first market is P = 50 – Q while the inverse demand for the customers in the second market is P = 40 – 2Q. The marginal cost is €10 in both markets. Suppose the firm wishes to charge a two-part tariff to its customers but it cannot distinguish between the customers in the first and second markets. Calculate the entry (fixed) fee that the firm should charge in these circumstances2:03 D 19 ll 37% Marked out of 30 P Flag question Suppose you are a manager of a County government project that is meant to provide rent-regulated housing units in low-income settlements. Using your knowledge of equilibrium, advice the Governor whether this policy will be a а. success. A Monopolist producing and supplying cooking gas to Mombasa city faces the demand b. function. = 8800 – 20P. Its cost function is given by TC = 20Q + 0.05Qʻ. Determine the quantity of cooking gas she will produce and the price she will charge to maximize profits and determine her profit. i. i. Explain how her profits she will affected if regulators forced her to operate like a perfectly competitive firm. ii. Illustrate and compute dead-weight loss and lost consumer surplus associated with her Monopoly operations. B I II II !!!
- Question 4 OCP is the monopoly seller of Soma with a constant marginal cost of production of $1 a unit. There are 100 potential consumers of Soma who belong to one of two types, heavy and light. There are an equal number of each type. The inverse demand curve of heavy users is pH(q) = 9.4 – 2q while that of light users is pL(q) = 3– q. We also assume there is no trade between different types of buyers. 1. If OCP could perfectly discriminate between the two types of buyers what two-part tariff should they charge each type to maximize profit? 2. Suppose the Government were to ban such price discrimination and required OCP to set a single two-part tariff. What would the profit-maximizing two-part tariff be? OCP cannot forbid any buyer from purchasing at the announced tariff.¹Consider a monopoly firm- firm 1 - which is choosing to invest in a new production facility. It has two choices: Facility Cost Capacity Small, S $12 2 units at zero marginal cost Large, L $30 10 units at zero marginal cost Both choices put a capacity constraint on the amount that the firm can produce. The firm is less capacity 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 - Q₁ A. Suppose the monopoly firm does not face any threat of entry. Will the firm invest in a small or a large facility?DEF only please
- 400.00 300.00 200.00 100.00 0.00 2.5 -100.00 -200.00 -300.00 -E(ys)E(YR) -E(NS) E(NR) E(YS) 100-100i E(YR)=100-50i E(IIS) -20 +100i E(IIR)= -70 +50i Assuming we are under monopoly and asymmetric information, what is the highest interest for which both types (safe and risky) stay in the market? Oi-2 Oi-0.5 O i-1 Oi-3 0 Objective functions 0.5 3.5Price elasticity of demand (PED) is an important tool for private firms. It helps in decision making. Discuss how knowledge of price elasticity of demand might be of practical use to a firm selling holiday tours in an island like Mauritius in a period of falling income (low economic situation) following the exposure of COVID-19. The price elasticity of demand for a monopolist’s product is –0.7. Advise the firm on its pricing strategy.18 Select whether the statement is true or false. A monopoly often has little incentive to improve the quality of its product when there is a barrier to entry. A true false
- MCQ 6 Consider a profit-maximising monopoly firm which operates under conditions of rising marginal cost and faces a downward-sloping demand curve. The firm is currently operating at the rate of production where MR is £120 and MC is £90. At this rate of production, ATC is £100. From this information we can infer that: A the market price must be £90 and the firm is incuring losses at the current rate of production B the firm is failing to maximise profits and should reduce price and increase the rate of production C the market price must be £100 and the firm is just able to break even at the current rate of production, earning normal profits D the firm is failing to maximise profits and should raise price above £120 and reduce the rate of production E I do not want to answer this question. F the market price firm is £120 and the firm is maximising profits at the current rate of productionST12.2 Deadweight Loss from Monopoly. The Las Vegas Valley Water District (LVVWD) is a not-for-profit agency that began providing water to the Las Vegas Valley in 1954. The District helped build the city's water delivery system and now provides water to more than 1 million people in Southern Nevada. District water rates are regulated by law and can cover only the costs of water delivery, maintenance, and facilities. District water rates are based on a four- tier system to encourage conservation. The first tier represents indoor usage for most residential customers. Rate for remaining tiers becomes increasingly higher with the amount of water usage. To document the deadweight loss from monopoly problem, allow the monthly market suPply and demand conditions for water in the Las Vegas Water District to be Qs=10P (Market Supply) QD = 120 – 40P (Market Demand) where Q is water and P is the market price of water. Water is sold in units of 1000 gallons, so a $2 price implies a user cost of…Define monopoly and it's limitations. Pls don't copy