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? %24

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? %24

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

I am not sure about this
Suppose that you are a manager for a firm like EBC Brakes, which manufactures brakes for automobiles and motorcycles. Your company has two plants, one in the United States and the other in the United Kingdom. The following tables include estimated demand and marginal revenue for your brakes, along with the marginal costs at the two factories. what quantity and price maximize your firms profit? What is the profit – maximizing number of brakes produced in the U.S. plant? In the U.K. plant? Quantity Demanded (brakes per hour) Price (dollars per brake) Quantity Produced in the U.K. plant (brakes per hour) Quantity Produced in the U.S. (brakes per hour) Total Quantity Produced Marginal Cost (dollars per brake) Marginal Revenue (dollars per brake) 104 196 47 42 89 66 92 105 195 48 44 92 68 90 106 194 49 46 95 70 88 107 193 50 48 98 72 86 108 192 51 50 101 74 84 109 191 52 52 104…
Part a b c
2. Jack is the owner of the only local bar in a small town. He sells whiskey in one-ounce glasses. For simplicity, let's assume it doesn't cost Jack anything to run his business. There are two customers, Adam and Burt who are twin brothers. Adam's demand function is ya = 16 – 2p, and Burt's demand function is yg = 8- p (price is measured in dollars and quantity is measured %3D by ounces). Jack knows their demand functions, but the problem is that he cannot tell them apart since they look exactly the same to him. To increase his profits, Jack offers the following two options that his customers can choose from: (1) You can pay $T1 up front and drink as much as you want; or (2) Pay $T2 up front and the price per ounce of whiskey will be $p. 2.a If p = 4, what is the maximal T2 that Jack can charge so that Burt is willing to come to the bar? 2.b What is the maximal T, that Jack can charge so that Adam will choose the first pricing option?
Consider a market with demand function P = 12 - 0.04Q and marginal cost function P = 6 + 0.12Q. (a) If this market is perfectly competitive, compute the equilibrium price, the equilibrium quantity, the consumer surplus and the producer surplus in the market. (b) If this market is a monopoly, compute the equilibrium price, the equilibrium quantity, the consumer surplus, the producer surplus and the deadweight loss (if any) in the market. Support your answers for (a) and (b) with one suitable market diagram
consider 2 gas stations in a remote village facing a simple linear markit demand Q=300-5P, but have different marginal costs of production, both constant, such that MCx=20 and MCy=10. 1. Measuring the quantities Qx on the horizontal axis and the quantities Qy on the vertical axis, draw the reaction curves for each of the gas stations.
The market for fidgets has only three firms, (A, B, and C), that compete in quantities. The market shares of the firms are sA = 60%, sB = 30%, and sC = 10% respectively. The demand in the market is P = 1 − Q. The marginal cost of firm A is zero. (a) Calculate the HHI in this market (in the year of your data). (b) Suppose that firm B buys firm C. (i) What type of merger would this be? (ii) According to EU rules (on HHI level and change), would this merger be concerning? (iii) According to US rules (on HHI level and change), would this merger be concerning? (c) Call the merged firm BC. Suppose that, after the merger, A and BC compete a la Cournot again and the market shares of the firms are in equilibrium sA = 60% and sBC = 40%. What must be the marginal cost firm BC? Comment on your answer
You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically. What are the profit, producer surplus and consumer surplus? The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this perfectly competitive environment, what would be the equilibrium price and quantity? Explain this in words and show it graphically. What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)? How much would you be willing to pay to keep the government from taking your monopoly away? Explain.
Faye is an entrepreneur considering whether to enter the market for providing websites to universities offering online learning. The market is currently perfectly competitive, and the market-clearing price is $10,000 per client. Her marginal cost is given by the equation MC = 200Q. a. In this market, what is Faye’s marginal revenue function? b. If Faye enters the market, how many website clients will she have, and what will her profit be? You can assume no fixed cost. Now imagine Faye asks you for advice. She knows you have just taken this course, and you learned about market power. c. Explain two ways Faye can achieve greater market power in this market. Faye takes your advice, and she is now the monopolist in a new market, where the demand curve is given by Q = 300,000 – 1,000P d. What is Faye’s new marginal revenue curve? e. In this new market, how clients will she have, and at what price will she sell her services? Now imagine you see all the profits Faye is making and you decide…
AgK rents out computing services to agricultural producers. The charge a fixed rental payment for the right to unlimited computing at a rate of P USD per minute. There are two types of potential users: 100 farmers and 100 ranchers. Each farmer demand is given by Qf = 20 - Pf, and each rancher's demand is given by Qr = 25 - Pr, where Q is in 1000 minutes per month and P is in USD per minutes. The marginal cost is 5 USD per minute. Suppose that you could separate farmers and ranchers. For ranchers, the optimal rental fee is A) 5 B) 200,000 C) 500 D) 0
There are two firms in the pumpkin industry: C and S. The demand function for pumpkins is q = 3, 200 - 1, 600p. The total number of pumpkins sold at the market is q = qC + qS, where qC is the number that C firm sells and qS is the number that S firm sells. The cost of producing pumpkins for either firm is $0.50 per pumpkin no matter how many pumpkins they produces. 1. Every spring, each of the firms decides how many pumpkins to grow. They both know thelocal demand function and they each know how many pumpkins were sold by the other firmlast year. In fact, each firm assumes that the other firm will sell the same number this year asits sold last year. So, for example, if firm S sold 400 pumpkins last year, firm C believes thatfirm S will sell 400 pumpkins again this year. If firm S sold 400 pumpkins last year, what doesfirm C think the price of pumpkins will be if firm C sells 1,200 pumpkins this year? 2. If firm S sold 400 pumpkins last year, firm C believes that if he sells qtCpumpkins…
Consider the competitive market for ruthenium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound), go 72 64 56 48 40 32 24 ATC 16 AVC MC- ☐ 0 4 8 12 16 20 24 28 32 36 40 QUANTITY (Thousands of pounds) The following graph plots the market demand curve for ruthenium.