4. A monopolist faces the demand curve: P = 1,200 – 0.2Q, and Cost: TC = 324,000 +300Q + 0.4Q 2.
a. Determine the monopolist’s profit-maximizing output,
b. List two different types of barriers to entry – one that is dependent on the Government and one type of barrier that is not – that would enable a
c. Suppose that the monopolist losses its barrier to entry and this market becomes
d. Compute
e. Compute
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- 3. Suppose that the elasticity of demand is e = -1.5 at every point on the demand curve and that a monopolist has a marginal cost of MC = 5. What price does the monopolist set?arrow_forwardIn the following table are demand and cost data for a pure monopolist. Complete the table by filling in the columns for total revenue, marginal revenue, and marginal cost. Total revenue Marginal revenue Total cost Marginal cost Quantity Price $34 $ 20 32 36 30 46 28 50 26 54 24 56 22 64 20 80 18 100 16 128 10 14 160 (a) What output will this monopolist produce? (b) What price will the monopolist charge? (c) What total profit will the monopolist receive at the profit-maximizing level of output? (d) Generally, what are the relative values of price, ATC, and AVC when a monopolist experiences: a profit a loss but continues to produce a loss but ceases production |이-234567 8 9 은arrow_forwardQuestion 2 of 20 The graph shows the demand curve faced by a pure monopolist. a. Move the interactive point to identify where marginal revenue (MR) is equal to marginal cost (MC) for this monopolist, use the shape to identify the firm's profits, and then answer the question and complete the sentence. 100 Marginal Cost Profits 90 MR = MC 80 Average Total Cost 70 60 50 40 30 20 Demand 10 Marginal Revenue 10 20 30 40 50 60 70 80 90 100 Quantity Price ($)arrow_forward
- 5. Use the following figure to answer the question: If the monopolist charges the same price to all consumers, what will be the deadweight loss at the monopolist’s profit maximizing level of output?arrow_forward7. A monopolist faces inverse demand p(Q) = 22 - 2Q and has total cost function TC(Q) = 2Q. a. Calculate the equilibrium price, quantity, consumer surplus, and producer surplus if the monopolist must charge all consumers the same price. b. Suppose instead that the monopolist can perfectly price discriminate among consumers. What are the price, quantity, consumer surplus, and producer surplus now? c. Alternatively, the monopolist decides to charge a two-part tariff. What lump sum fee and price per unit should the monopolist charge if consumers are homogeneous?arrow_forwardMonopoly Market MC - Marginal Cost MR - Marginal Revenue D - Demand ATC - Average Total Cost Refer to the figure above. If this monopolist is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be: $5 $20 $40 $60 2.5 pointsarrow_forward
- Consider the electricity industry, in which there are very large fixed costs but also in which variable costs are directly proportional to total output so that the marginal cost of each unit produced is small and constant. a) Assuming that one firm has an electricity monopoly, draw a diagram that shows the price the monopolist charges and the quantity the monopolist sells at this price. Be sure to include marginal cost, average total cost, marginal revenue, and demand curves in your diagram. What happens if the electricity industry is perfectly competitive? More specifically, let us assume that the marginal cost curve from part (a) is equal to the perfectly competitive market supply curve. In this case, show in a diagram what the perfectly competitive equilibrium price and quantity in this industry are. What will happen to the number of firms producing electricity in the long run? What does this say about the desirability of monopoly vs. perfect competition in this industry?…arrow_forwardThe accompanying graph depicts the marginal revenue (MR), demand (D), and marginal cost (MC) curves for a monopoly a. Place point Pi at the profit maximizing price and quantitvy assuming that the monopolist can only charge a single price. 100 95 90 85 80 75 70 65 2 60 b. What are the profits of the firm if it charges a single price? 50 45 Suppose the monopolist able to successfully price discriminate between two groups by charging one group $60 and charging $35 to the other group. c. What are the firm's profits if it charges the two prices as mentioned above? 35 30 25 20 15 10 MR 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantityarrow_forward**You only need to answer Question C*arrow_forward
- 2. Given the demand curve of the monopolist Q = 60 - 2P and the cost function of the monopolist TC = 50-4Q+ 0.5 Q^{2}, Then find: A. The inverse demand function, average revenue, the marginal revenue functions, marginal cost function? B. Find the level of output and price that maximizes the monopolist profit? C. The level of profit at equilibrium. D. Show graphically profit maximization level of output?arrow_forwardAssume a monopolist with downward-sloping demand and marginal revenue (MR) curves. The monopolist operates with standard marginal cost (MC) and average total cost (ATC) curves. How does a monopolist determine the profit-maximizing output level and the corresponding profit-maximizing price? A. The output level occurs where MR-MC and price is determined from the demand curve at this output level OB. The output level occurs where Demand = MC and price is determined from the marginal revenue curve at this output level. OC. Both the output level and price are found where MR = MC. OD. Both the output level and price are found where Demand = MC.arrow_forwardPlease Answer part f . please draw the complete graph Suppose a monopolist faces demand D = 6 − Q and MR = 6 − 2Q, and has costs T C = 1 + 2Q, and MC = 2. The monopolist is unable to price discriminate. a. Derive the ATC. Is this a natural monopoly and why?. b. Draw the demand curve, MR, MC, ATC on a graph. Make sure to label the curves and axes clearly Calculate the value of the optimal Q and P. Label this on the graph of the previous question (part b). d. Calculate the value of the profit at this point. Also label this on the graph (part b). e. The government’s antitrust division determines this monopoly has too much market power. It has two options: break the monopoly into two smaller companies, or regulate it using a price ceiling. Which should it do and why?. f. The government has decided to enact the price ceiling. On the graph, label the price ceiling that maximizes consumer surplus. Indicate this consumer surplus on the graph (part b).arrow_forward
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