ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- M2arrow_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_forwardHow do you find the profit maximizing PRICE (not level of output) on a graph for a monopoly with demand, marginal revenue, marginal cost, and average total cost curves. Group of answer choices Find the minimum point on the ATC curve and go straight over to the price axis. Find the point where MR = MC and go straight over to the price axis. Find the point where MR = MC, go straight up until you hit the demand curve, and then go straight over to the price axis. Find the point where demand hits marginal cost and go straight over to the price axis.arrow_forward
- Saltanat has a monopoly on ginger (имбирный) cookies in Almaty. The inverse demand function for the cookies is P = 100 – Q, where P denotes price and Q denotes quantity. The marginal cost is zero. a)Calculate P, Q and profits, if Saltanat maximizes profits. b) Now suppose instead that the ginger-cookie industry is competitive. Calculate P, Q and profits.arrow_forwardSuppose that the demand a monopoly faces is given by: Q = 10 − P + 10A, where Q is the quantity of output and A is the quantity of advertising. Suppose the cost of advertising and output is given by: C(Q, A) = Q^2 + 100A. Derive profit-maximizing quantity, price, and the quantity of advertisingarrow_forwardQ,)Assume a monopoly market characterized by the following: P = 10 – 1.5Q (demand curve) MC = 2 + Q (marginal cost curve) Find the monopolist’s equilibrium price and quantity consistent with profit maximizationarrow_forward
- Kalamazoo Competition-Free Concrete (KCC) is a local monopolist of ready-mix concrete. Its annual demand function is Q* = 10,000 – 200P, where Pis the price, in dollars, of a cubic yard of concrete and Qis the number of cubic yards sold per year. Suppose that Kalamazoo's marginal cost is $20 per cubic yard and fixed costs are sunk. Instructions: Round your answers to 2 decimal places. a. What is the deadweight loss from monopoly pricing? b. Now suppose that fixed costs are avoidable and large enough such that the monopolist elects not to produce. What is the deadweight loss from the monopoly not producing? %24arrow_forwardSubject:arrow_forwardConsider a monopoly market with demand curve Q(P) = . Suppose that producing a good costs $1 per unit and the firm must produce at least 1 unit by law. (1) What is the elasticity of demand? (2) How much would the monopolistic firm produce?arrow_forward
- For the monopoly represented by the figure to the right, at what quantity is its revenue maximized? (Hint: Revenue is maximize where MR = 0.) Why is revenue maximized at a larger quantity than profit? Show the revenue curve. In the figure to the right, let D be demand and MR be marginal revenue. The quantity at which revenue is maximized is Q = 10 units. (Enter your response rounded to the nearest whole number.) Revenue is maximized at a larger quantity than profit because A. costs are decreasing in output. OB. marginal costs can be negative. C. marginal revenue is decreasing in output. OD. D. revenue is greater than profit. OE. profit is decreasing in output. Using the three-point curved line drawing tool, graph the monopoly's revenue curve. Label this curve 'R.' Carefully follow the instructions above, and only draw the required objects. p. $ per unit 30 28- 26- 24- 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 024 100- 90- 80- 70- 60- 50- 40- 30- 20- 10- 0- 6 MR D 8 10 12 14 16 18 20…arrow_forwardConsider a monopoly with inverse demand given by P(q)=a-bq and cost function c(q)=cq, where a>c>0 and b>0 are parameters, and q is the quantity supplied by the monopoly. Find the monopoly’s profit-maximizing price and output, and calculate the output and the welfare loss compared to the competitive outcome.arrow_forwardConsider a monopoly that faces the demand curve P = 20 − Q, and has the marginal cost curve MC = 2. a) Use the demand curve to find the equation of the marginal revenue curve. b) Find the profit-maximizing price and quantity for this monopoly if the monopoly uses uniform pricing. What is the producer surplus? c) Now, suppose the monopoly wants to increase profits using block pricing. The total cost the monopoly incurs is T C = 2Q. Find the optimal quantities, Q1 and Q2, and their corresponding optimal prices, P1 and P2 that maximize profits using a two-block pricing scheme. What is the new producer surplus? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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