1. Consider a monopolist with cost function C(q) = 20q + 700 facing demand given by q = 200-5p, where p is the price of the good. a) Suppose the firm charges every consumer the same price. Show that the firm will not find it profitable to operate b) Suppose the firm is able to carry out perfect price discrimination. Will the firm operate in this case? What is the firm's profit equal to? c) Calculate the efficiency loss of the "single-price" monopoly outcome in part (a)

1. Consider a monopolist with cost function C(q) = 20q + 700 facing demand given by q = 200-5p, where p is the price of the good. a) Suppose the firm charges every consumer the same price. Show that the firm will not find it profitable to operate b) Suppose the firm is able to carry out perfect price discrimination. Will the firm operate in this case? What is the firm's profit equal to? c) Calculate the efficiency loss of the "single-price" monopoly outcome in part (a)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4) A monopolist faces a market inverse demand function: P = 250 – 5Q and marginal cost function: ATC = MC = 10. Answer the following. If the monopolist employs a single price strategy, what is the optimal quantity produced and price charged. What is the market up and contribution margin from the strategy in part a if Ed = -1.0833. If other firms trying to enter this market had slightly higher cost structures, what would be a good price & quantity mix to limit entry of competition and why (no math needed). If the monopolist could create a bundled good instead of the strategy in part a, what price would it charge and how many units would be sold in the bundle. What are the profits from part a & part d? Which pricing strategy is preferred. EC: Briefly explain why a firm that offers a buy 2 get the 3rd free deal, does not just offer that same product at a 33.33% discount of the normal stated price. Need help with number 2.
There are two types of consumers: one half of consumers are type 1 (low type) and the other half = 8 – P, while type 2's demand is given by P. Consider a monopolist selling its product to these consumers. Assume that the marginal are type 2 (high type). Type l's demand curve is q1 - q2 = 12 – cost is equal to zero. Now suppose that the firm can separate type 1 from type 2. That is, market segmentation is possible, and so the firm charges P for type 1, while charging P2 for type 2. (1) What should be the profit-maximizing P for type 1 consumers? (2) What should be the profit-maximizing P2 for type 2 consumers? (3) What is the social surplus under P and P2 computed in 1.2.(1)-(2)?
2. A monopolist faces a representative consumer who acts as a price taker and has the demand function as Q(Q) = 200 – 2P. Suppose the monopolist bears the total cost C(Q) = 100 + 20Q + when producing Q units. a. Find the producer surplus of the monopoly if it exercises perfectly price discrimination. b. Find the producer surplus of the monopoly under the optimal two-block pricing. c. If the monopoly sells with two-part tariff T = A + pQ to the consumer, find its optimal A and p.
Scenario: Suppose that the demand is given by: P = 100 - Q Marginal Revenue is MR = 100 - 2Q and Total Cost function is: TC(Q) = 200 Assume the firm is a price-maker (monopolist). What will be the optimal quantity (Q") under the two-part pricing? (Hint: plug the price into the demand equation)
You are the manager of a monopolistic firm, and your demand and cost functions are given by P = 300 − 3Q and TC(Q) = C(Q) = 1,500 + 2Q2, What is the MR of the firm? What is the MC of the firm? Determine the profit maximizing level of price and output? How much profit will the monopolist make?
1. A firm faces the following inverse demand curve: P = 500 - 0.25Q Where: Q is the monthly production P is price, measured in dollars per unit. The firm also has a total cost (TC) function of: TC = 200Q. Assuming the firm maximizes profits, answer the following: a) Assuming the firm operates as a monopolist, calculate the following: price, quantity, and profit. Graph and show the equilibrium price and quantity. b) Assuming perfect competition, what are price, quantity and profit? Show on the graph from above.
A firm is originally operating as a single-price monopolist that faces a market demand curve P(Q) = 198 –0 and total cost curve equal to TC (q) = 10, 500 + 32Q, with constant MC equal to MC(Q) = 32 for all units produced. Part (a): How much output does the firm produce and at what price is each unit sold for? Part (b): Calculate the firm's profit. The firm now realizes there are actually two distinct groups of consumers that purchase their product, with the following demand functions: P(q1) = 242 – qı P(q2) = 176 – 92 Their total and marginal cost curves have not changed. If the firm wanted to successfully practice third-degree price discrimination: Part (c): How many units of output would they sell to group 1 and how much will each consumer in group 1 pay? Part (d): How many units of output would they sell to group 2 and how much will each consumer in group 2 pay? Part (e): How much profit is earned by the firm when they practice third-degree price discrimination? Part (f): How much…
Suppose a monopolist's total cost function is given by c = 0.004q +30q + 2000, and the revenue function is r = q(1200 - 6q), where c is measured in dollars and q is measured in tonnes per week. a. Determine marginal cost when g = 50. b. Express profit (n) as a function of q. Determine the profit-maximising level of output and the corresponding maximum profit. Justify your answers. C.
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= 240 + 0.5Q², and face 4. A monopolist has the cost function TC(Q) market demand P = 45 – Q. (a) Find the monopoly equilibrium price and output. Find the monopolist's profit.
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Suppose a nonlinear price discriminating monopolist faces an inverse demand curve: P = 110-Q, and can set three prices depending on the quantity a consumer purchases. The firm's profit is: π = P₁ Q₁ + P₂ (Q₂ −Q₁) + P3 (Q3 − Q₂) - mQ3, where p₁ is the high price charged on the first units Q₁ (first block) and P2 is a lower price charged on the next (Q₂ -Q₁) units and p3 is the lowest price charged on the (Q3 - Q₂) remaining units. Q3 is the total number of units actually purchased, and m = 75 is the firm's constant marginal and average cost. Using calculus, determine the profit-maximizing values for P₁, P2, and p3, and the firm's profits. The profit-maximizing value for (round your answers to the nearest penny) P₁ P₂ = $ P3 = $ The firm's profit is $ 9 and