4. Suppose a monopolist can produce any level of output it wishes at a constant marginalcost of c=5. Assume the monopoly sells its goods in two different markets separatedby some distance. The demands in the two markets are given by9₁ = 55-P₁ and 92 = 70-2p2(a) If the monopolist can maintain the separation between the two markets, whatlevel of output should be produced in each market, and what price will prevail ineach market? What are total profits in this case?

The study and analysis of financial challenges confronting firms using abstract economic concepts…

Suppose a monopolist can produce any level of output it wishes at a constant marginal cost of c=5. Assume the monopoly sells its goods in two different markets separated by some distance. The demands in the two markets are given by 91 = 55-P₁ and 92= 70-2p2 (a) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this case?

Suppose a monopolist can produce any level of output it wishes at a constant marginal cost of c=5. Assume the monopoly sells its goods in two different markets separated by some distance. The demands in the two markets are given by 91 = 55-P₁ and 92= 70-2p2 (a) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this case?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.6P

See similar textbooks

Similar questions

What is the usual shape of a total revenue curve for a monopolist? Why?
How can a monopolist identify the profit-maximizing level of output if it knows its marginal revenue and marginal costs?
4. Suppose that a monopolist can produce any level of output it wishes at a constant marginal (and average) cost of KShs.5 per unit. Assume further that the monopolist sells its goods in two different markets that are separated by some distance. The demand curve in the first market is given by: Q1 = 55 – P1 Page 2 of 3 The second market’s demand curve is given by: Q2 = 70 – 2P2 a) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what prices will prevail in each market. b) What are the total profits in the situation above? c) How would the above answers change if it only cost demanders KShs.5 to transport goods between the two markets? d) What would be the monopolist’s new profit level in this situation? e) How would your answer change if transportation costs were to fall to zero?
E4 Suppose that the monopolist can produce with total cost: TC = 10Q. Assume that the monopolist sells its goods in two different markets separated by some distance. The demand curves in the first market and the second market are given by Q1 = 120 - 4P1, and Q2. = 240 - 2P2. Suppose that consumers can mail the product from cheaper location to a more expensive location freely (mailing cost $0). What would be the monopolist profit? 3750,3500,5250,4000.
. Let the demand curve for a monopolist’s product be P = 100 – 2Qd and the marginal cost of production be constant at MC = 10. Suppose that the firm considers moving from a uniform pricing strategy to a two-block tariff where the first block provides 15 units at a price of P1 = $70 and the second block provides an additional 15 units at a price of P2 = $40. How much does the monopolist’s profit rise with this scheme?
. Suppose a monopolist producing Q units of output faces the demand curve P = 130 − 4Q. Its total cost when producing Q units of output is T C(Q) = F + 34Q+ 2Q2 , where F is a fixed cost. (a) For what values of F can a profit-maximizing firm charging a uniform price earn at least zero economic profit? (b) For what values of F can a profit-maximizing firm engaging in perfect first-degree price discrimination earn at least zero economic profit.
3. A monopoly sells its goods in the U.S. and Japanese markets. The American inverse demand function is: PA = 1403QA and the Japanese inverse demand function is: PJ = 100-2QJ Assume that the firm's marginal cost of production is m = = 50 in both countries. (a) If the firm can price discriminate (prevent resale between markets), what price will it charge, how much will it produce, and how much profit will it earn in each market. (b) Resolve the problem assuming that the firm cannot price discriminate (e.g., Pa = PJ = p). (c) Compare your results from (a) and (b). How does price discrimination impact the firms' profits? How does it impact consumers in the American and Japanese markets?
6. Consider a monopolist facing a linear inverse demand curve p(q) = a bg, where q denotes units of output and b > O represents the slope of the inverse demand curve. This rm faces cost function C (q) = F + cg, where F denotes its xed costs (can contain sunk costs), c represents the monopolist s (constant) marginal cost of production and assume a >с 0. a. Find the monopolist's profit maximizing output and label it Verify if it is positive. b. What is the market price pm and the profit level Tm? Is the profit level always positive? If not what is the condition for the profit level to be positive? Explain c. Find the absolute value of the price elasticity of demand Is the elasticity greater than one? Find the markup on price or Lerner index, defined as p(q)-C'(q) evaluated at qm as defined in the textbook. L (q) p(q) at gm. What happens with L when n increases? Is it true that "A proft maximizing monopolist decreases its markup as demand becomes more price elastic. Explain. d. Find the…
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?…
What are the four most important ways a firm becomes a monopoly? Will a monopoly that maximizes profit also be maximizing revenue? Will it be maximizing output? Explain. Assume the graph below represents the market for a monopolist. What quantity will the monopolist produce, and what price will she charge? What will her total revenue, costs, and profit be at this level of production? What will the deadweight loss for society be at this level of production? (Assume the MC curve is a straight line between the relevant points for this calculation.) 3. U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?
2. A monopolist has two specific demanders with demand equations: qA = 10 – p and qB = 10 – 2p. This monopolist implements an optimal two-part tariff pricing scheme, under which demanders pay a fixed feea for the right to consume the good and a uniform price p for each unit consumed. The monopolist chooses a and p to maximize profits. This monopolist produces at constant average and marginal costs of AC = MC = 2. The monopolist’s profits are __________ and the average price paid by demander B is _________.
I need ans 3 In the next two problems, (1) and (2), consider a monopolist that maximizes profits and charges all consumers the same price. The inverse demand function is P = 100 – Q, where P is the price and Q is output. Calculate the deadweight loss to consumers (if any) and to the monopolist (if any). (1) Marginal cost is always zero. (2) Marginal cost is MC = Q. (3) Assume that every consumer has the inverse demand function P = 10 – Q and that marginal cost is always zero. There are 10 consumers. The monopolist wants to maximize profits by designing a two-part tariff. Calculate the two parts of the tariff, and calculate profits.