Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 3WNG
To determine
Determine whether the firm in the figure earns profit, if it produces quantity Q3 and charge price P3.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A firm with market power can divide its sales into two submarkets, the demands and
marginal revenues of which are shown in the following diagram.
$
Price, marginal revenue, and marginal cost (dollars)
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0
5
10
MRA
15
MRB
20
Quantity
25
DA
30
35
MC = ATC
DB
40
(a) How many quantities of output should the firm produce?
1
45
Q
(b) How many quantities should be sold to market A? How many quantities should
be sold to market B? What price should be charged in each market?
(c) Calculate the price elasticities at the prices charged in each submarket. Do these
price elasticities have the expected relative magnitudes? Explain.
(d) What is the amount of profit generated by the firm?
Using the IRAC rule,please answer and discuss the question. John entered into a contract for the sale of his restaurant to Catherine. One of the terms of the contract was that Catherine would not open up a similar business within 20 miles of the location of the restaurant being sold. About a month after the sale John noticed a spanking new restaurants two blocks down the road from his recently purchased business. When he found out that the proprietor of the new restaurant was Catherine, he sued for breach of contract.
Explain the likely outcome based on the laws governing legality.
TotsPoses Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price (shown in the following table). Assume George has no fixed costs, and his cost of producing each portrait is $12.
a. How much should George charge if he must charge a single price to all customer? At this price, how many portraits will George produce each day? What will be his economic profit?
b. How much consumer surplus is generated each day at this price?
c. If George is very experienced and knows the reservation prices of each customer, how many portraits will he produce each day and how much economic profit will he earn?
d. Assume George charges only 2 different prices. He know that customers with reservation prices above $30, will never use coupons and the customers with reservation prices below will always use…
Knowledge Booster
Similar questions
- Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves: 1 Demand: P=100-Q Marginal Revenue: MR 100-20 Marginal Cost: MC=10+Q On the following graph, use the blue line (circle symbol) to graph Mr. Potter's demand curve. Then, use the black line (cross symbol) to graph his marginal revenue (MR) curve. Next, use the orange line (square symbol) to graph his marginal cost (MC) curve. Finally, use the grey point (star symbol) to indicate the profit-maximizing price and quantity. Price (Dollars) 110 100 90 NO 70 60 50 30 -20 30 40 60 60 -70 -60 90 110 30 50 70 80 90 Quantity (Units) Demand MR MC * Profil-Maximization The profit-maximizing quantity is units, and the profit-maximizing price is $ (?) Mayor George Bailey, concerned about water consumers, is considering a price ceiling that is 10% below the monopoly price. At this new price, the quantity demanded would be units. At this quantity, the…arrow_forwardSuppose Bedox is a patent drug for man’s beauty. Her manufacturer faces a market demand for Bedox of Q = 1,000 – 0.2P. She has a cost function of C = 300,000 – 1,000Q + 10Q^2. What is the profit-maximizing output level and price? What is the profit? Show your calculation and the calculated results on a well-labeled diagram.arrow_forwardAssume Standard Oil owns all the refineries in the US. What would be the price it would charge for kerosene in the 1800s, if the demand for kerosene is P=100-5Q and its marginal cost is MC=20.arrow_forward
- The company Econislife is deciding what output level will provide profit-maximization. According to the graph below, what level of output will maximize profit? 10,000 T 9,000- 8,000- 7,000+ 6,000+ Dollars 5,000+ 4,000+ 3,000+ 2,000- 1,000+ Total cost Total revenue 10 20 30 40 50 60 70 80 90 Quantity 100 Econislife total revenue and total cost Provide your answer below:arrow_forwardThe mobile phone landscape looks drastically different today than it did three decades ago. In 1983, Motorola accounted for seventy five percent of the mobile phone market. But by 2021, its market share had shrunk to just 2.2%. How did this happen, and how has the mobile industry changed over the last 30 years? In 1983, Motorola launched one of the world’s first commercially available mobile phones—the DynaTAC 8000X. Motorola went on to launch a few more devices over the next few years and quickly became a dominant player in the emerging industry. In the early days of the market, the company’s only serious competitor was Finnish multinational Nokia. By the mid-1990s, other competitors like Sony and Siemens started to gain some solid footing, which chipped away at Motorola’s dominance. In September 1995, the company’s market share was down to 32.1%. By January 1999, Nokia surpassed Motorola as the leading mobile phone manufacturer, accounting for 21.4% of global market share. That…arrow_forwardMany apparel companies expanded into mask production during the pandemic. Now that vaccines are readily available, and places are beginning to drop the mask mandates, these masks are heavily discounted at most retailers, and have been completely discontinued at other retailers. For those firms who are discounting their masks, what must be their estimation of how the price they’re charging relates to AC and AVC? How do fixed costs play into their calculation? At what point would it be more profitable for them to burn the masks than to sell them at a discount?arrow_forward
- Refer to the diagram below to answer the questions. Assume there is only one cable firm. 3.1) If the government regulates the cable firm so they can earn only a normal return, find the price, the output and the profit. 3.2) If the government does not regulate the cable firm, find the price, the output and the profit. Assume cost per unit is RM14.50. Working calculation and answer:arrow_forwardPlease type your NUMERICAL answer in the space below. ENTER ONLY THE NUMBER. IF answers are in decimals, please round the number to one decimal point. Winterfell Cable TV pays $100,000 per year to earn exclusive rights to air a premium sports channel. There are two types of subscribers in Winterfell: 3,000 die-hard sports fans who will pay as much as $200 a year for the new channel and 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it. a) If Winterfell Cable is unable to price discriminate, what price will it charge and how much are its profits? Price Profits= b) If Winterfell Cable is able to price discriminate, how much will it make in profits? Profits= What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price c) discriminating policy? DWL=arrow_forwardUse the following table to answer questions 49 and 50. Reservation Prices and Costs in Econland for a Widget Reservation Cost to price for one widget $18 make oneS widget $2 person person D1 S1 D2 16 4 S2 D3 14 6. S3 D4 12 8. S4 D5 10 10 S5 D6 8. 12 S6 D7 14 S7 D8 4 16 S8 D9 18 S9 D10 20 S10 49. The table above provides reservation prices and costs of the inhabitants of Econland. Suppose we have an allocation where D7 consumes a widget but D1 does not. This is not Pareto Efficient because: a. D1 could give D7 $1 for the widget, and both are better off b. D1 could give D7 $10 for the widget, and both are better off c. D1 could give D7 $20 for the widget, and both are better off d. D1 could give D7 $5 for the widget, and both are better off e. None of the above 50. Suppose we have an allocation where S1, S2, S3, S4 and S5 produce a widget, and D1, D2, D3, D4 and D5 consume a widget. a. This is not Pareto efficient because we can have S9 sell to D1 for $18, S8 sell to D2 for $16, S7 sell…arrow_forward
- Apple faces competition from many other firms in the world market for mobile phones; therefore, Apple cannot have market power. Do you agree with this statement?arrow_forwardBased on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P=1,200−10QP=1,200−10Q Total Revenue: TR=1,200Q−10Q2TR=1,200Q−10Q2 Marginal Revenue: MR=1,200−20QMR=1,200−20Q Marginal Cost: MC=300+10QMC=300+10Q where QQ indicates the number of copies sold and PP is the price in Ectenian dollars. Complete the following table by finding the price and quantity that maximize the company's profit and the price and quantity that maximize social welfare. Scenario Price Quantity (Dollars) (DVDs) Maximizes the company's profit Maximizes social welfare The deadweight loss from the monopoly is . Suppose, in addition to the foregoing costs, the director of the film has to be paid. The company is considering four options: I. A flat fee of 2,500 Ectenian dollars II. 50 percent of the profits III. 150 Ectenian dollars…arrow_forwardMathematics for Business and Economics Q1) 3x2 ( 12x3 + 20 )0.5 within the range 6 and 8. Q2) The marginal revenue of a firm is given by the following equation: MR(Q) = 20 + 14Q + 13Q2 Where, Q represents the quantity produced. Also given, the total revenue of the firm, when they produce 5 units of output, is 50, i.e., TR(5) = 50. a)Calculate the firm's total revenue function. What is the value of the constant term in the total revenue function? b)Calculate the total revenue of the firm when the firm produces 7 units of output.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning