Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 12, Problem 4WNG
To determine
Determine the quantity in the figure that is consistent with profit regulation and price regulation.
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If the government wants to increase the market efficiency through price regulation, would you suggest the government setting the price equal to the firm’s marginal cost or its average total cost? Explain in detail with the diagram in part
Use the table below to complete the following exercise. Plot the price and quantity data. Indicate the price elasticity value at each price. What happens to the elasticity value as you move down the demand curve?
Price $
% Change in Price
Quantity Demanded
% Change in Quantity
5
100
10
100
80
220
15
66
60
225
20
33
40
233
25
25
20
250
30
30
0
2100
b. Below the demand curve plotted in (a), plot the total-revenue curve, measuring total revenue onthe vertical axis and quantity on the horizontal axis
C. Using the data in (b), what would a 10 percent increase in the price of movie tickets mean for the revenue of a movie theatre if the price elasticity of demand was, in turn, -0.1, -0.5, -1.0 and 5.0?
U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing reimportation of their drugs back into the United States.
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- QUESTION 2 Consider the following graph: Price P1 P2 P3 P4 P5 Q5 Q302 01 04 Curve D Curve A Market efficient quantity Market efficient price Curve C Curve A = MR, Curve B = Demand, Curve C = ATC, Curve D = MC Match the correct values to the descriptions: ▾ Monopoly profit maximizing quantity Curve B Monopoly profit maximizing price Quantity A. P1 B. P2 C. P3 D. P4 E. P5 F. Q1 G. Q2 H. Q3 I. Q4 J. Q5arrow_forwardDiscuss the basic differences between a competitive and a monopoly market. Which market has higher elastic demand in the long run and why?arrow_forwardBlue INK is the only cabel service provider in Gazipur. The diagram below depicts the price, output and costs incurred by Blue INK. Use the graph to answer the following questions: 1. What is the Total revenue generated by Blue INK at the profit maximizing level of output? 2. If the Cable Service Market turns into a Perfectly Competitive Market, what will be the total ammount of the service provided? 3. If the market turns into a Monopoly market again, what will be the total deadweight loss created?arrow_forward
- It is often said that a competitive market is more beneficial for the consumers as compared to the monopoly market. Why ? Explain.arrow_forwardU.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profit reasons, oppose laws allowing re-importation of drugs to the United States.arrow_forwardDraw the graph. If the monopoly is a price-discriminating monopoly charging some customers P1= $950 and other customers P2=$400, then: 1. At the price P1= $950, the monopoly will sell a quantity Q1 = ______ 2. At the price P2= $400, the monopoly will sell a quantity Q2 = ______. (Obs: calculation required here!)3. Total quantity sold at both prices is Q3 = Q1 + Q2 = ___________. 4. The profit earned from selling the quantity Q1 at P1 is Profit1 = ____________________(identify the area on the graph and calculate it).5. The profit earned from selling the quantity Q2 at P2 is Profit2= ____________________(identify the area on the graph and calculate it).6. The total profit earned by the price discriminating monopolist is Profit = Profit1 + Profit2 = _______.arrow_forward
- Explain the concept of black marketing as a direct consequence of price ceiling in economics?arrow_forwardU.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. Explain why these companies, for profifit reasons, oppose laws allowing reimportation of drugs to the United States.arrow_forwardHow does price discrimination play a role in the economy?How does the idea of price discrimination apply to an industry?arrow_forward
- 1. Calculate the profit-maximizing quantity and price for the non-student market. (attached Figure A: Non-Students) 2. Calculate the profit-maximizing quantity and price for the student market. (attached Figure B: Students) 3. Calculate the profit if the firm charges both the non-students and students the same price of $20. (attached Figure A: Non-Students and Figure B: Students) 4. Calculate the profit if the monopoly firm perfectly price discriminates. (attached Figure A: Non-Students and Figure B: Students)arrow_forwardQuestion 18 Alex Potter owns the only well in a town that produces clean drinking water. He faces the following demand P=200-2Q, and marginal cost MC=50+2Q, marginal revenue MR= 200-4Q curves. In order to maximize profits, Alex should charge a price of $150 at the profit maximizing quantity with a marginal revenue equal to $150. $100 at the profit maximizing quantity with a marginal revenue equal to $150. $100 at the profit maximizing quantity with a marginal revenue equal to $100. $150 at the profit maximizing quantity with a marginal revenue equal to $100. O Oarrow_forwardDescribe the concept of price elasticity? Why it is for a monopoly less profitable to act inmarkets with high price elasticity?arrow_forward
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