2. Monopoly Pricing. An Analytical Example. Consider a firm with the demand curve P = 500-Q and a cost function TC = 2500+ 4Q². a. What is the marginal revenue function for this firm? MR Qm b. Intuitively, why is marginal revenue more steeply sloped than demand (average revenue?) Reason for Steeper MR Slope: c. Identify the optimal level of output, price and profits for this firm. pm πm d. Were this firm a member of a competitive industry, what would be the quantity, price and profit level for the firm?

2. Monopoly Pricing. An Analytical Example. Consider a firm with the demand curve P = 500-Q and a cost function TC = 2500+ 4Q². a. What is the marginal revenue function for this firm? MR Qm b. Intuitively, why is marginal revenue more steeply sloped than demand (average revenue?) Reason for Steeper MR Slope: c. Identify the optimal level of output, price and profits for this firm. pm πm d. Were this firm a member of a competitive industry, what would be the quantity, price and profit level for the firm?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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2. Monopoly Pricing. An Analytical Example. Consider a firm with the demand curve P = 500 - Q and a cost function TC = 2500 +4Q². a. What is the marginal revenue function for this firm? MR b. Intuitively, why is marginal revenue more steeply sloped than demand (average revenue?) Reason for Steeper MR Slope:
Monopoly firm a. When a best-selling book was first released in paperback, the Hercules Bookstore chain seized a profit opportunity by setting a selling price of $9 per book (well above Hercules’ $5 average cost per book). With paperback demand given by P = 15 - .5Q, the chain enjoyed sales of Q =12 thousand books per week. (Note: Q is measured in thousands of books.) Draw the demand curve and compute the bookstore’s profit and the total consumer surplus. b. For the first time, Hercules has begun selling books online—in response to competition from other online sellers and in its quest for new profit sources. The average cost per book sold online is only $4. As part of its online selling strategy, it sends weekly e-mails to preferred customers announcing which books are new in paperback. For this segment, it sets an average price (including shipping) of $12. According to the demand curve in part (a), only the highest value consumers (whose willingness to pay is $12 or more)…
Q1. Consider the following graph for a pure monopoly firm selling electricity. (a)What are the profit maximization output and price? How much is the profit? (b)Suppose the demand for electricity increases due to the unusually cold weather. Would the profit maximizing output increase or decrease? What about the price?
Onestore has monopoly power in Smalltown. Assume that Onestore is a profit maximizing firm and currently operates at a negative economic profit in the short run.(a) Draw a correctly labelled diagram for Onestore and show each of the following:(i) The profit maximizing price and quantity labelled as Pm and Qm respectively (ii) Shade completely, the area representing the negative economic profit (b) Explain why Onestore continues to operate in the short run despite earning negative economic profit in the short run. c. A single price monopolist’s demand curve is given by:P = 240 – 3qand its total cost curve is given byTC = 30 + 6q Calculate the monopolist’s profit maximizing level of output Calculate the profit maximizing price for the monopolist What is the profit of the monopolist?
2. Suppose the cost function for a monopoly is given by TC =F+c.q where TC is the total cost, F is the fixed cost and q is the output of the firm. The demand function for the monopoly is given by q = A-bP where A > 0 and b > 0. Find out the profit maximizing price, quantity, and profit for the monopoly. Also find out the expression for the marginal revenue of the monopoly as well as the elasticity of demand facing the monopoly.
Price (Dollars per Garment) 7 D E 5 АС-МC Demand Marginal Revenue 20 Garments cleaned per year (millions) The long run average and marginal cost of dry-cleaning services is $5, as shown in the graph. Given the demand curve and the marginal revenue curve shown in the graph, which of the following is true? Select one: O . If the industry were served by a profit-maximizing monopoly, the price of dry-cleaning services would be $7 per garment. Ob. If the industry were perfectly competitive, 10 million garments would be cleaned each year. If the market were served by a profit-maximizing monopoly, the price of dry-cleaning services would be $5 per garment and monopoly economic profit would be zero. O d. If the industry were perfectly competitive then the long-run equilibrium price of dry-cleaning services would be $7 per garment.
5(Chapter 11 Monopoly) The inverse demand for an app is P = PD (Q) = 30 - 0,4. Q. The inverse demand function indicated the price P, were the quantity Q will be sold. The app is sold just from the app developer. The programing of the app creats fixed costs of 420. The marginal costs are 2. a) Draw the demand curve b) Calculate the marginal revenue and the average cost function. Draw the marginal revenue and marginal cost function in the diagram of a). c) Determine the profit maximizing quantity and price. What are the average costs? What is the profit? Draw the average cost curve and the profit in the diagram. Show the consumer surplus (CS) and producer surplus (PS). d) What are the price and quantity if you a have fixed costs of 490? What is the profit? e) Consider the case that the developer of the App wants to maximize the overall welfare and not just his profit. Determine price and quantity. What is the profit? Show CS and PS. f) Draw the welfare losses of the Monopoly, which occur…
Answer the given question with a proper explanation and step-by-step solution. 3. Use monopoly firm A's graph below to answer questions a-g. a) To maximize profit firm A should produce approximately ______X b) Briefly explain your response to part a: _____ c) What is the maximum price firm A can charge if it produces 6 units of X? $________ d) Firm A's total revenue at 5 units of X is $_________ e) Firm A's total cost at 6 units of X is $________ f) Firm A's total profit at 6 units of X $____________ g) Is firm A's profit positive, zero, or negative? h) Briefly explain your answer to part g:
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2. A ski resort faces daily demand given by p = a - Q, where a varies from day to day. Over a three- day period, a takes on the values 80.100, and 120. The marginal cost is zero. The fixed cost for the three-day period is $2500. If the firm uses dynamic pricing, it changes its price every day to maximize profit. If it uses non-dynamic pricing, it sets the same price for all three days, assuming that a takes on its average value of 100 each day. Calculate the consumer surplus and the firm's profit over the three-day period under each pricing approach.
The demand function equation faced by PTCL for its computers is given by:P = 50,000 – 4Qi. Write the marginal revenue equationii. At what price and quantity marginal revenue will be zero?iii. At what price and quantity will total revenue be maximized?