Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 14, Problem 5MC
To determine
Total profit.
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Suppose there are 5 types of consumers: Type A. Type B. Type C. Type D, and Type E. There are 2,000 of each type. Two software
products are sold by a monopolist: spreadsheets and word processing. Assume the marginal cost of producing each program is $25.
Consumer Type
A
B
с
D
E
Number
2,000
2,000
2,000
2,000
2,000
Spreadsheet
200
75
50
25
0
b. What is profit under this pricing policy?
Willingness to Pay
Word Processor
Instructions: Round your answers to the nearest whole number.
a. What will be the profit-maximizing bundle price?
0
25
50
75
200
Both
200
100
100
100
200
c. How will profit from this pricing policy compare to profit under independent pricing of the two goods?
When pricing independently, the profit-maximizing price for spreadsheets is $
processing is $
d. What is profit under independent pricing?
and the profit-maximizing price for word
e. Now consider the possibility of offering a bundle and selling the two programs separately. Can you find prices for the bundle and
the…
The accompanying diagram depicts a monopolist whose price is regulated at $10 per unit. Use this figure to answer the questions that follow.
a. What price will an unregulated monopoly charge?$ b. What quantity will an unregulated monopoly produce?unitsc. How many units will a monopoly produce when the regulated price is $10 per unit?unitsd. Determine the quantity demanded and the amount produced at the regulated price of $10 per unit. Is there a shortage or a surplus?Quantity demanded: units
Amount produced: unitsThere is: (Click to select) a shortage neither a shortage nor a surplus a surplus .e. Determine the deadweight loss to society (if any) when the regulated price is $10 per unit.$ f. Determine the regulated price that maximizes social welfare. Is there a shortage or a surplus at this price?$ There is (Click to select) neither a surplus nor a shortage a surplus a shortage at this price.
Suppose there are 5 types of consumers: Type A. Type B. Type C. Type D, and Type E. There are 3,000 of each type. Two software
products are sold by a monopolist: spreadsheets and word processing. Assume the marginal cost of production is $0.
Consumer Type
A
B
C
D
E
Number
3,000
3.000
3,000
3.000
3,000
Spreadsheet
800
300
200
100
0
b. What is profit at this pricing policy?
$
Willingness to Pay
Word Processor
Instructions: Round your answers to the nearest whole number.
a. What will be the profit-maximizing bundle price?
$
0
100
200
300
800
Both
800
400
400
400
800
c. How will profit from this pricing policy compare to profit under independent pricing of the two goods?
When pricing independently, the profit-maximizing price for spreadsheets is $
processing is $
d. What is profit under independent pricing?
$
and the profit-maximizing price for word
Chapter 14 Solutions
Managerial Economics: A Problem Solving Approach
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- outline the monopolist profit rectangle. on the graph, label the price the monopolist will charge, the quantity the monopolist will produce, the TR and TC. Calculate the profit. A profit-maximizing monopolist will charge a price of ___, produce a quantity of ___ units per hour, and earn a profit of ____?arrow_forwardThe graph below shows the demand and marginal cost curves for the monopolist Mr. Peanut. a. Draw the marginal revenue curve. Plot only the endpoints of the graph below. Costs and revenues 140 120 100 80 60 40 20 0 10 20 30 40 Quantity per period 50 60 D MC Tools marginal revel b. What are the values of the profit-maximizing output and price? Output: Price: $ c. What are the values of output, price and total revenue when the firm's total revenue is maximized? Output: Price: $ Total revenue: $arrow_forwardC. The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce? What will its profits be? Quantity Price per Unit Total Cost 10 $10 $20 20 $8 $50 30 $6 $65 40 $4 $90 50 $2 $120arrow_forward
- The following graph shows a total revenue curve for a monopolist. $ 0 Quantity Refer to the above graph. The profit-maximizing firm will produce in that output level where total revenue is: A. B. C. D. TR Rising Falling Rising and falling Zeroarrow_forward1. The table shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table. Assume that output can only be sold in integer amounts (i.e., 1 unit, 2 units, etc.). 2. Once you have filled in marginal revenue, identify the quantity produced by the monopolist in this market.arrow_forwardRequired information The following graph shows the average and marginal revenue curves for a monopolist: Revenues $600 500 400 300 200 100 0 10 20 MA 30 Quantity Refer to the graph above to answer this question. What is the monopolist's maximum revenue?arrow_forward
- Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the internet, and they can act as a single-price monopolist if they choose. Each time the movie is downloaded, their internet service provider charges them a fee of $6. The accompanying table shows the demand schedule for their film. Price of download Quantity of downloads 10 2 3 4. 8 12 20 The marginal revenue per download when price changes from $6 to $4 is 0 3 O-1 O Need more information to tell. O 2 O 0.667arrow_forwardFor a monopolist to produce one more unit of output, Select one: a. the price must be equal to the marginal cost b. the difference of total revenue gained and total revenue lost must be greater than zero c. the price must be equal to the average variable cost. d. demand must be in the in inelastic range of the demand curve e. the difference of the price and marginal revenue must be equal to zeroarrow_forwardCalculate the price in Country U using the following information in a Monopoly market when there is a possibility for resale: The elasticity of demand in Country J is -5.5 and Country U is -2.2 Marginal cost is $12. a. $22 b. $22.5 c. -$22.5 d. $12arrow_forward
- Given a graph below. A. Name all the lines or curves. B. Identify the pricing behavior of a monopolistwith predatory pricing and identify the profit if a monopolist acts a true monopolist. Explain thepossible relationships among the curves.arrow_forwardThe accompanying diagram depicts a monopolist whose price is regulated at $10 per unit. Use this figure to answer the questions that follow. a. What price will an unregulated monopoly charge? b. What quantity will an unregulated monopoly produce? c. How many units will a monopoly produce when the regulated price is $10 per unit? d. Determine the quantity demanded and the amount produced at the regulated price of $10 per unit. Is there a shortage or a surplus? e. Determine the deadweight loss to society (if any) when the regulated price is $10 per unit. f. Determine the regulated price that maximizes social welfare. Is there a shortage or a surplus at this price?arrow_forwardMonopoly Market MC - Marginal Cost MR - Marginal Revenue D - Demand ATC - Average Total Cost Refer to the figure above. If this monopolist is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be: $5 $20 $40 $60 2.5 pointsarrow_forward
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