ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Why Marginal Revenue is less than
How would Marginal Revenue be affected if this monopolist could successfully
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- Suppose a monopolist could charge a different price to every customer based on how much he or she were willing and able to pay (versus charging the same price to all their customers). How would this affect the monopolist's profits? Why?arrow_forwardThe profit-maximizing quantity of a monopolist facing a downward-sloping demand curve must be produced at a point where the demand is elastic (meaning the demand elasticity with respect to price e < -1). True or false? Why?arrow_forwardIf a monopoly firm can sell 12 items per day at a price of $150 each, and to increase sales by one (marginal) item per day, the monopolist must lower price to $148, calculate the marginal revenue of the 13th item:arrow_forward
- What is the usual shape of a marginal revenue curve for a monopolist? Why? When a monopolist identifies its profit-maximizing quantity of output, how does it decide what price to charge? Is a monopolist allocatively efficient? Why or why not? ALCOA does not have the monopoly power it once had. How do you suppose their barriers to entry were weakened? For many years, the Justice Department has tried to break up large firms like IBM, Microsoft, and most recently Google, on the grounds that their large market share made them essentially monopolies. In a global market, where U.S. firms compete with firms from other countries, would this policy make the same sense as it might in a purely domestic context? If public utilities are a natural monopoly, what would be the danger in deregulating them? Why does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers? In the middle of the twentieth century, major U.S. cities had multiple…arrow_forwardHow, if at all, will a monopolist respond to a rise in the price of an input? (provide explanation with graphs)arrow_forwardSuppose a monopolist faces a market demand that is the first two columns in the table below. Also, in the short run, assume that Total Fixed Cost equals $100 and the monopolist has Total Variable Cost according to the table. Find Total Revenue for each price and quantity combination, and then Marginal Revenue as price falls and quantity increases. Fill in the rest of the costs in the table and find profit at each price and quantity combination as the difference between Total Revenue and Total Cost. If profit is less than zero that indicates a loss. What is the maximum profit you found in this table? At what quantity and price combination is profit maximized for this monopolist? Next, verify this result by using Marginal Analysis to find the profit maximizing price and quantity combination. For each quantity, ask yourself if Marginal Revenue exceeds Marginal Cost. If it does, then profits would be increased by producing that quantity. As you go down the table to higher quantities, stop…arrow_forward
- What are ways in which a monopolist can engage in price discrimination?arrow_forwardThis is part 1 of a multi-part question. A monopolist faces the demand curve Q = 144 / P2, where Q is the quantity demanded and P is price. Its average variable cost is AVC = Q1/2 and its fixed cost is 25. 1. Find the monopolist's profit-maximizing quantity. (Round to at least 2 decimal places.)2. Find the monopolist's profit-maximizing pricearrow_forwardUse the following Table showing the demand schedule for a monopolist facing a constant marginal cost of $4. Assume that the firm pays no fixed costs. How many units of output will the firm produce, and how much economic profit will be earned? Quantity Demanded 1 2 3 4 5 6 7 8 9 Price $12 $11 $10 $9 $8 $7 $6 $5 $4 A) 5 units; $8 B) 5 units; $40 C) 7 units; $36 D) 7 units; -$6 E) 5 units; $20arrow_forward
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