Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 11, Problem 4E
a)
To determine
To compute: The marginal cost for unique
b)
To determine
To calculate: The price to be charged by the unique, if the price
c)
To determine
To compute: The marginal revenue at the price computed in Part (b).
d)
To determine
To compute: The price to be charged by the unique, if a competitor develops a substitute for the magnometer and the price elasticity increases to
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Unique Creations holds a monopoly position in the production and sale of magnometers. The cost function facing Unique is estimated to be
TC=$100,000+20QTC=$100,000+20�
What is the marginal cost (MC) for Unique?
If the price elasticity of demand for Unique is currently –1.5, what price should Unique charge?
What is the marginal revenue (MR) at the price computed?
If a competitor develops a substitute for the magnometer and the price elasticity increases to –2.25, what price should Unique charge?
Unique Creations holds a monopoly position in the production and sale of magnometers. The Cost function facing Unique is estimated to be
TC=$100,000+20Q
What is the marginal cost (MC) for Unique?
If the price elasticity of demand for Unique is currently -1.5, what price should unique charge?
What is the marginal revenue (MR) at the price computed?
If a competitor develops a subsitute for the magnometer and the price elasticity increases to -2.25, what price should Unique charge?
The Metro Electric Company produces and distributes electricity to
residential customers in the metropolitan area. This company is a monopoly and faces the following
(inverse) demand:
P = 0.04 – 0.01Q,
where Q is the quantity and P is the price per unit. Its cost function is:
C(Q) = 0.005Q + 0.00375Q².
(a) What is the firm's marginal cost function? What is the firm's marginal revenue function?
Find the equilibrium price and quantity.
(b) Illustrate graphically the equilibrium price, quantity, consumer surplus, and producer surplus.
(c) Compute the equilibrium consumer surplus and producer surplus. Compute the deadweight
loss of this monopoly.
(d) Now a new competitor, Western Light, with constant marginal costs MC. = 0.025 can
potentially enter the market. What can Metro Electric Company do to retain the market?
What price would it charge? What quantity would it produce? How do the deadweight loss
in this scenario compares to that in part (c)? How ywould your answers (here in part (d))…
Chapter 11 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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