Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Chapter 13, Problem 15SQ
To determine
The price and quantity of the regulated market.
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Round off your final answer to whole #.
A company produces and sells a consumer product and is able
to control the demand by varying the selling price. The approximate relationship between price and demand is
2700
5,000
p=47 +
-forD>1
D
D²
The company is seeking to maximize its profit. The fixed cost is $1,000 and the variable cost is $39 per unit.
What is the number of units that should be produced and sold each month to maximize profit?
Question 26
The economic entity most likely to engage in price gouging is
the manufacturer of the product, such as a Honda generator.
a national big-box store, such as Target or Walmart.
a local, regular supplier of the product.
an individual or business who has a supply of the product somewhere else.
a local resident who wants to get rid of his or her own product.
1) Suppose that market demand is linear, q = 70 - p. Marginal costs are constant and equal to 10.
The upstream firm, which is a manufacturer, does not sell directly but through a single
downstream firm, which is a retailer. The manufacturer set the wholesale price w at stage 1. At
stage 2, the retailer who is assumed not to incur any costs except wholesale price (w), observes
the wholesale price and sets the retail price p.
Find the optimal wholesale price (w*):
Find the optimal retail price (p*):
Find the quantity demanded (q*) that corresponds to p*:
Find the manufacturer's profit (TM) that corresponds to p*:
Find the retailer's profit (TR) that corresponds to p*:
Find the overall channel profit (II* = TUM+ TUR):
Chapter 13 Solutions
Micro Economics For Today
Ch. 13.2 - Prob. 1YTECh. 13.6 - Prob. 1.1YTECh. 13.6 - Prob. 1.2YTECh. 13 - Prob. 1SQPCh. 13 - Prob. 2SQPCh. 13 - Prob. 3SQPCh. 13 - Prob. 4SQPCh. 13 - Prob. 5SQPCh. 13 - Prob. 6SQPCh. 13 - Prob. 7SQP
Ch. 13 - Prob. 8SQPCh. 13 - Prob. 9SQPCh. 13 - Prob. 10SQPCh. 13 - Prob. 11SQPCh. 13 - Prob. 12SQPCh. 13 - Prob. 1SQCh. 13 - Prob. 2SQCh. 13 - Prob. 3SQCh. 13 - Prob. 4SQCh. 13 - Prob. 5SQCh. 13 - Prob. 6SQCh. 13 - Prob. 7SQCh. 13 - Prob. 8SQCh. 13 - Prob. 9SQCh. 13 - Prob. 10SQCh. 13 - Prob. 11SQCh. 13 - Prob. 12SQCh. 13 - Prob. 13SQCh. 13 - Prob. 14SQCh. 13 - Prob. 15SQCh. 13 - Prob. 16SQCh. 13 - Prob. 17SQCh. 13 - Prob. 18SQCh. 13 - Prob. 19SQCh. 13 - Prob. 20SQ
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- 1) Suppose that market demand is linear, q = 70 - p. Marginal costs are constant and equal to 10. The upstream firm, which is a manufacturer, does not sell directly but through a single downstream firm, which is a retailer. The manufacturer set the wholesale price w at stage 1. At stage 2, the retailer who is assumed not to incur any costs except wholesale price (w), observes the wholesale price and sets the retail price p. Find the optimal wholesale price (w*): Find the optimal retail price (p∗): Find the quantity demanded (q∗) that corresponds to p∗: Find the manufacturer’s profit (π*M) that corresponds to p∗: Find the retailer’s profit (π∗R) that corresponds to p∗: Find the overall channel profit (Π∗ = π*M+ π*R): Next, consider a case that the integrated firm produce the product and sell directly to consumers. Suppose the market demand is q = 70 - p. Marginal costs are constant and equal to 10. Find the optimal retail price (pi): Find the quantity demanded (qi)…arrow_forward4. Windies Cricket manufactures Windies supporter jerseys. The quantity q, of these jerseys demanded weekly is related to the wholesale price per jersey p, by the following equation: P = 0.006q+15 The weekly total cost incurred by Windies Cricket for producing q jerseys is: C(q) = 38q - 0.02q² + 30,000 d. Will Windies Cricket record a loss or profit if they were to produce and sell 2450 jerseys? e. If Windies Cricket wishes to maintain a total cost less than $42,000.00, what range(s) of Windies jerseys should be produced. f. Calculate the equilibrium price and quantity for Windies jerseys.arrow_forwardFor each of the following separate parts, you are required to draw a graph. (a) The market for apples is perfectly competitive. The market price is high such that a firm in the market makes profit. Draw a graph of an individual firm. Your graph should include MC, MR and ATC. You should also indicate profit-maximizing quantity and the maximized profit. (b) Firm C is a monopolist firm, and firm C makes a profit. Draw a graph for firm C. Your graph should include MC, MR, demand curve and the ATC. You should also indicate the maximized profit.(c) Based on the following graph, draw the curves MC, ATC and AVC. (Put all 3 curves on the same graph.) Mark the value of Q where MC is at its minimum.arrow_forward
- All else equal, a price reduction will have a bigger impact on the revenue of industries that have ?arrow_forwardSuppose a firm's patent expires. In this case, the market price of the good/service will _____ and the quantity sold will _____. Question 26 options: a increase; increase b increase; decrease c decrease; increase d decrease; decreasearrow_forward(a) Draw a correctly labeled graph for a single-price monopoly and show the profit-maximizing quantity, labeled Q1. (b) Assume the monopoly now engages in perfect price discrimination. On your graph in part (a), show the profit-maximizing quantity for the price-discriminating monopoly, labeled Q2. (c) Based on your answer in part (b), what will happen to the consumer surplus? Explain. (d) Is the output produced by the perfectly price-discriminating monopolist allocatively efficient? Explain.arrow_forward
- Demand: Q = 300 / N - P Marginal income: IMg = 100 / N - 2Q Total cost: TC = 125 + 02 Marginal cost: CMg = 2Q 1. How many units does each company produce? (The answer to this and the next two questions depends on N.) 2. What price does each company assign? 3. How many profits does each company make? 4. In the long term, how many companies will exist in this market?arrow_forward6. A record company estimates the industry demand for "hard alternative rock" albums to be: QD-1000 -125 P. It estimates the industry supply to be: QS = 125-P a. Given these estimates, what does it expect the industry output and price to be? b. A government commission announces that lyrics on "hard alternative rock" albums are offensive and should be banned. This causes consumers to purchase 20% more of such albums at any given price, compared to question 6a. What effect will this have on industry output and the price? c. Calculate the consumer surplus for parts a and b above. Are consumers better or worse off given the commission's recommendation?arrow_forwardA risk-neutral monopoly must set output before it knows the market price. There is a 50 percent chance thefirm's demand curve will be P = 20 − Q and a 50 percent chance it will be P = 40 − Q. The marginal cost of thefirm is MC = Q. The profits are maximized in the expected sense when: 8) _______A) MC = Expected value of price. B) MC = E(MR).C) Expected value of price = E(MR). D) MC < E(MR).arrow_forward
- A local hospital offered to buy firm A for $5,000, and the offer was refused. However, many observers now perceive that firm A is “in play” and may be sold if the right offer comes along. a. In successful transactions, purchasers have typically paid ten times current profits. How much would firm A be worth to a buyer from outside the industry? b. Would you expect that firm B would be willing to pay more or less than an outside buyer? c. What is the most firm B would be willing to pay for firm A?arrow_forwardSeafood Salt Company wishes to third degree price discriminate to meet competition in two markets A and B. The firm’s total cost schedule is TC = 300 + $2*QA + $2*QB. Demands in the two markets are QA = 120-10*PA and QB = 120 – 20*PB. The profit-maximizing prices to charge in markets A and B are PA = _____ and PB = _____. A. 6; 5. B. 8; 5. C. 7; 4. D. 5; 8. E. None of the above.arrow_forward•i) How many units did a company sell at $25.92 if they have 36% of the $6,480,000 industry? ___________ •j) Excluding beer and wine sales, the LCBO has a monopoly on liquor sales in Ontario, what is their market share in the legal liquor industry? _______________(trick question sort of)arrow_forward
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