30Figure 3.PA22232015.12-10-30MCATCMRQ0q1215⑧In order to maximize profits, the monopolistsshould charge a price ofa$20b)$12c)$9d) $45④Perfect price discrimination occurs when a businesscharges the maximum possible price for each unitconsumed. In Figure 3, how many units wouldthe monopolist produce if he card price-discrimi-nate perfectly?a) 12b) 15c) 9d) 20

Detailed Explanation: The profit maximization condition for a monopolist is achieved when:Marginal…

Answered: 30 Figure 3. PA 22 23 20 15. 12- 10- 30…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Monopoly

Section: Chapter Questions

Problem 6CQQ

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How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
Can you think of any examples of successful predatory pricing in the real world?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into four films of equal size, with the idea that eliminating the monopoly would promote competitive pricing of electricity. What do you anticipate would happen to prices?
Assume the only costs to the firm are marginal costs (so MC-ATC in this case) and that the firm/s cannot price discriminate. Price, cost, marginal revenue of diamond $1,000 800 600 400 200 MC -200 -400 MR 8 10 16 20 Quantity of diamonds (See Figure 3) At the profit maximizing quantity for the monopolist, total revenue is total cost is and profit is O $4800, $3200, $1600 O $1600, $3200, $1600 O $600, $200, $400 O $4800, $1600, $3200
4. Assume that a monopolist sells a product with the cost function C = F + 20Q, where C is totał cost, F is a %3D fixed cost, and Q is the level of output. The inverse demand function is P 60 - Q, where P is the price in %3D the market. (i) How much profit does the firm earn when it charges the price that maximizes profit ? (ii) At what price will the firm earn zero economic profits ?
Cost & Figure 15 Revenue $10 per unit MC $9 $8 АТС $7 $6 $5 $4 $3 $2 $1 MR 2 3 4 7 8 10 Quantity (in thousands) Refer to the above Figure 15 which shows cost curves, a marginal revenue (MR) curve and a demand curve faced by a monopolist. If this monopolist is profit maximizing and does not price discriminate, it will produce ( Select ] v units of output and charge a price of [ Select ] per unit. Given its cost curves, we can tell that this monopolist is currently earning [ Select ] economic profit. According to the classical welfare economics, the socially efficient quantity to be produced in this market would be [ Select ] units of output and a socially efficient price would be [Select ] per unit.
If the monopolist shown in the following figure could practice first-degree price discrimination, the consumer surplus would be: Price (dollars) 50 40 30 20 10 0 O $450.00 $900.00 $0.00 $225.00 O $1,200.00 30 50 60 MR 100 MC Quantity
28 $55 $50 $45 MC АТС I of $40 $35 $30 $25 $20 Demand = P $15 $10 $5 $0 MR 40 80 120 160 200 240 Output (Q) The diagram above shows the Demand, MR, and cost curves for a monopolist in the short-run. At the profit maximizing Output (Q) level, the monopolist will earn a Total Profit of: Sel one: а. $1,200 b. $2,200 c. $800 d. $2,000 $$
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
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.
B) The table below shows the information on quantity, price and cost of a monopolist. Assume that the fixed cost is $20, Quantity Price Total Variable Cost 10 $9 $20 20 8 $60 30 $7 $120 40 S6 $200 50 $5 $300 60 $4 $420 Determine the optimal output of the firm and compute the profit or loss of the firm at the optimal output. At what price will the monopolist exit from the industry?

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