A monopolist firm faces a demand with constant elasticity of -1.3. It has a constant marginal cost of $18 per unit and sets a price to maximize profit. If marginal cost should increase by 20 percent, would the price charged also rise by 20 percent? OA. Yes. Since the price elasticity of demand is constant, P= 1.3MC. Thus, if MC increases by 20 percent, price also increases by 20 percent. B. No. Since the demand curve is downward sloping, a 20 percent increase in MC will cause the price to increase by more than 20 percent. OC. Yes. Since the price elasticity of demand is constant, P = 4.33MC. Thus, if MC increases by 20 percent, price also increases by 20 percent. OD. No. Since the demand curve is downward sloping, a 20 percent increase in MC will cause the price to increase by less than 20 percent.

A monopolist firm faces a demand with constant elasticity of -1.3. It has a constant marginal cost of $18 per unit and sets a price to maximize profit. If marginal cost should increase by 20 percent, would the price charged also rise by 20 percent? OA. Yes. Since the price elasticity of demand is constant, P= 1.3MC. Thus, if MC increases by 20 percent, price also increases by 20 percent. B. No. Since the demand curve is downward sloping, a 20 percent increase in MC will cause the price to increase by more than 20 percent. OC. Yes. Since the price elasticity of demand is constant, P = 4.33MC. Thus, if MC increases by 20 percent, price also increases by 20 percent. OD. No. Since the demand curve is downward sloping, a 20 percent increase in MC will cause the price to increase by less than 20 percent.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Momocita is the only supplier of momos in the market. It is a profit maximizing, single-price monopolist with a constant Marginal Cost of $5, no fixed cost and faces a typical downward sloping demand curve. It currently charges a price of $14.5 for a plate of momos. If it increases its price to $15 a plate, which of the statements below is TRUE? Revenues will increase, costs increase and profits increase. Revenues will decrease, costs increase and profits decrease. Revenues will increase, costs increase and profits decrease. Revenues will increase, costs decrease and profits increase. Revenues will decrease, costs decrease and profits decrease. Revenues will increase, costs decrease and profits decrease.
Consider the following cost and demand information for a monopolist. Demand is Qm = 34 - 1*Qm, Total Cost is TC = 20 + 2*Qm + .5*Qm2. At the profit-maximizing quantity, marginal revenue and marginal cost are equal to $........?
Please 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).
A simple profit-maximizing monopolist with a continuous linear demand curve has positive marginal costs at all levels of production above X = 0. Which one of the following statements is FALSE in the short run? Select one: a. At the chosen level of output, an increase in the price of the good will necessarily reduce total revenue b.At the chosen level of output, demand for the good is price elastic c. At the chosen level of output, the monopolist is not maximizing total revenue d.At the chosen level of output, economic profit is necessarily positive
There is a firm who is monopolist. Suppose that there are 20,000 potential customers with valuations uniformly distributed between £0 and £1000. A customer will purchase the products if her valuation is more than the firm's price. a) How many quantity will the firm sell if it sets a single price of £550? b) Write an equation for the firm's demand curve. c) If marginal cost is £100, what is the profit-maximizing price and quantity? What is consumer surplus and total welfare? Suppose that the firm can perfectly price discriminate. a) What is the profit-maximizing quantity now? b) What is consumer surplus and total welfare
Suppose the inverse demand function for a monopolist's product is given by P=100-2Q and the cast function isC(Q)=10+2Q. What is the profit-maximizing price of the firm?A. $15 B. $51 C. $41 D. $32 And what is the profit-maximizing quantity of the firm?A. 24.5B. 18C. 20.5D. 16
monopolist has demand and cost data given in the table below. The 'P' column gives the demand data -- what is the maximum amount the firm can charge to sell the associated quantity Q? The 'TC' column gives the total cost of producing that level of quantity Q. Q P TC 0 17 10 1 15 15 2 13 19 3 11 23 4 9 27 5 7 32 6 5 38 7 3 46 1. What is the marginal profit of the 1st unit? 2. How many units should this firm produce to maximize profit? No hand written solution and no image
The questions have already been answered. The answers are bolded. I recieved 12/14 points on this question. What part did I get wrong?
Suppose you are a monopolist and you have two customers, A and B. Each will buy either zero or one unit of the good you produce. A is willing to pay up to $35 for your product; B is willing to pay up to $10. You produce this good at a constant average and marginal cost of $8. If you could not engage in third-degree price discrimination, what price would you charge? OA $10. OB. $15. OC. $35. OD. $45. If you could practice third-degree price discrimination, you will earn a profit of $ (For simplicity, assume that if a consumer is indifferent between buying and not buying, he will buy.) Click to select your answer(s)
Suppose that a profit-maximizing monopolist faces a demand curve of P = 240 – 4Q, a marginal revenue ofP=240 – 8Q, a marginal cost of 8Q, and an average total cost of 4Q. a. What quantity will the monopolist supply? b. What price will the monopolist charge? c. How much revenue will the monopolist make at the profit maximizing quantity? d. What is the monopolist's total cost at the profit maximizing quantity? e. How much profit will the monopolist make?
The Amazing Restaurant is the only restaurant in Amazing Island. The restaurant provides dining services to two distinct market segments: local residents and tourists. In each market segment, the demand curve has constant elasticity. The price elasticity of the tourists’ demand is -1.33, while the price elasticity of the locals’ demand is -1.5. a) Suppose that the marginal cost is constant for each market, and equal to $15 per meal. What prices should the monopolist charge in each market segment? [Hint: consider the markup formula: [(P-MC)/P = -1/e] b) As part of an effort to encourage tourism in the island, the local government decided to subsidize the restaurant by $5 for every tourist who dines at the restaurant. What prices should the monopolist charge now in each market segment?