ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Related questions
Question
thumb_up100%
A basketball club is the only one in its region and is therefore able to behave like a
monopolist. It sells tickets to Adults (A) and Juniors (B), whose demand curves are given by:
Pa! = 120 − Qa!
Pj = 60 − Qj"
Additionally, the club’s total costs are given by TC = 10Q
a) Initially, the club sets its price by charging all supporters the same price, according to
the aggregate market demand curve. Calculate the maximising output, price and the
resulting profit for the club as well as
b) The club hires an economist to consider its pricing strategy and receives the advice
that it should charge different prices to each type of supporter. Find the prices it sets
in both markets, the sales (output) in each and its overall level of profit and illustrate 3
profit maximising outputs and prices of each consumer type on a graph (one graph for
each type of consumer). Calculate consumer surplus in this case.
c) What conditions must be satisfied for a producer to be able to implement a policy of
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 40 36 32 28 24 20 0 0 1 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 True ATC MC O False 9 10 D The water company is experiencing economies of scale. Which of the following statements are true about this natural monopoly? Check all that apply. + Monopoly Outcome The water company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. In order for a monopoly to exist in this case, the government must have intervened and created it.…arrow_forwardConsider a monopoly market in which the market demand curve is given by P = 240 - 2Q, the marginal revenue curve is MR = 240 – 4Q, the marginal cost curve is MC = 2Q, and there are zero fixed costs. Suppose the government intervenes and turns the market into a competitive market, and all the firms in the market have the same marginal cost curve as the monopolist, MC = 2Q, and zero fixed costs. How much is the resulting gain in total surplus? 400 800 300 600arrow_forwardQuestion a)monopoly faces a demand curve: D(p)=200-p. MC-10, FC= 100. Calculate the profit- maximaizing quantity and answer the following questions: P= CS= PS= TR= Marginal revenue function: MR= Inverse demand function: P= profit= TC= SW(Social welfare)= Optimal quantity: Q= Find the values for the above quantities using the following set of options: 9900 100 1900 90 4050 20 200-Q 110 200-20 8000 8100 12150 180 b) The average cost function of a competitive firm is AC= 3/Q+ 2+ 3*Q The optimal quantity is: 2 How much is the profit? c) The marginal utility of x is 100-14x, and that of y is 200- Ay. The price of x is 1, the price of y is 2, the income of the consumer is 100. How many of y is there in the optimal basket?arrow_forward
- The demand for seats per game, at a local stadium that seats a maximum of 40 million per game, is P = 22 – 0.2Q where P is the price of a ticket and Q represents the number of seats (expressed in millions). Assume that all seats and all games are the same, and marginal cost = $10 = average cost. Calculate the maximum profit per game if the local stadium is owned by a monopolist charging the same price for each seat.arrow_forwardYou own a road resurfacing business called Dahyun Bricks services located in Seoul. You are the only reservicing business in South Korea. Therefore, you have a local monopoly. Your experience running the company for many years has taught you that market demand for your service can be described by the demand function: p = 20 - Q. The cost function is c =q². Therefore, marginal cost equals 2q. Quantity refersto square metre of road resurfacing. Note the Q denotes aggregate market demand and q denotes your production. Of course, if you are the only supplier than q = Q. a) Compute profit maximising price and output. Compute profits. b) The monopoly profit that you have been earning has attracted attention from another firm that will set up operations in South Koreaand compete for market share. You are concerned with losing market share and profit. So, you offer the potential entrant the following deal. Both firms agree to maximise industry profits (joint profits). The potential entrant…arrow_forward1. 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.arrow_forward
- The following graph gives the demand (D) curve for water services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local water company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 40 36 20 12 8 4 0 0 1 MR 8 2 3 4 5 6 7 QUANTITY (Hundreds of cubic feet) ATC MC 9 10 O True The water company is experiencing economies of scale. The water company is experiencing diseconomies of scale. The water company must own a scarce resource. O False D Which of the following statements are true about this natural monopoly? Check all that apply. + Monopoly Outcome (?) It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government…arrow_forwardA city in a developing country does not have a provider of water and sanitation services, leading to poor health outcomes for its citizens. A firm is considering entering thatmarket. The cost curve is C(g) = 10 + 2q, and the inverse demand is P(g) = 10-q. Thegovernment of that city knows that, because of the high fixed cost to operate in this market, any entrant is likely to become a monopolist. Thus, they decide to implement the following regulation: the firm is not allowed to choose a price above an upper limit of p (which the government chooses and sets in the law before the firm decides to enter).There will be no transfers between the government and the firm.Assume that the firm only enters the market if it can get profits of at least zero, given the government's choice of p. Suppose that the government's goal is to maximize consumer surplus. Which of the following statements is the most correct? The government needs to set p = 2, because it's the marginal cost. That eliminatesthe…arrow_forwardA movie monopolist sells to college students and other adults. The demand function for students is Q = 840 - 100P, and the demand function for other adults is Q = 1,600 - 100P. Costs is c(Q) = 12 +0.005Q2m per ticket, where Q=Qs+ QA- Instructions: Round your answers to 2 decimal places. a. What prices will the monopolist set when she can discriminate? Pstudent = $ per ticket. Padult = $ Profit = $ per ticket. b. What if demand for adults increases to Q = 1,800 - 100P? Pstudent = $ Padult = $ Profit = $ per ticket. per ticket. c. When adult demand increases, the adult price: decreases. does not change. increases. d. When adult demand increases, the student price: decreases. increases. does not change.arrow_forward
- Consider a monopolist facing a market demand given by: P = 200 - 4Q. Where P is the price and Q is the quantity. The monopolist produces the good according to the cost function c(Q) = Q2 + 5. Determine the profit maximizing quantity and price the monopolist will offer in the market. Calculate the profits for the monopolist. Calculate the deadweight loss due to a monopoly. Illustrate this in a well labelled diagram. I will thumbs up solution if it is original answer and not from ChatGPT, if ChatGPT is used I will thumbs-down and report to Chegg as ChatGPT returns the incorrect answer here and I'm stuck. Thank you! :)arrow_forwardA city has two newspapers. Demand for either paper depends on its own price and the price of its rival. Demand functions for papers A and B respectively, measured in tens of thousands of subscriptions, are 21-2Pa + Pb and 21 + Pa-2Pb The marginal cost of printing and distributing an extra paper just equals the extra advertising revenue one gets from another reader, so each paper treats marginal costs as zero. Each paper maximizes its revenue assuming that the other's price is independent of its own choice of price. If the papers enter a joint operating agreement where they set prices to maximize total revenue, by how much will newspaper prices rise? (a) 3 (b) 2 (c) 0 (d) 3.5 (e) 2.5arrow_forwardThe monthly demand function for x units of a product sold by a monopoly is p = 6,100 - Find the revenue function, R(x), in dollars. R(x) = Find the cost function, C(x), in dollars. C(x) = Find the profit function, P(x), in dollars. P(x) = Find P'(x). P'(X) = Find the number of units that maximizes profits. (Round your answer to the nearest whole number.) units Find the maximum profit. (Round your answer to the nearest cent.) $ dollars, and its average cost is C = 3,040 + 2x dollars. Production is limited to 100 units. Does the maximum profit result in a profit or loss? O profit O lossarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education