Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 25, Problem 12E
To determine
To explain:
The pricing strategy of universities, assuming that universities are profit-maximizing monopolists.The reason for colleges and universities provide scholarships and aids to students.
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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? 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?
Buyers
Jay
Phillip
Johnson
Kylie
Sofia
Willingness-to-Pay
$4
$3
$2.5
$2.5
$1.8
Marginal Cost
$2
$2
$2
$2
$2
Based on the information provided in the above chart answer the following question.
A monopolist decides to sell its product at a profit-maximizing price of $4. The marginal cost of the product for the monopolist is $2. In order to restore social efficiency, the social planner chooses the monopolist's
quantity and price. In this case, the social surplus increases by $
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.). Once you have filled in marginal revenue,
identify the quantity produced by the monopolist in this market.
Quantity
Marginal Revenue
MR₁:
MR3:
MR5:
1
2
3
4
5
6
Price
$13
$12
$11
$10
$9
$8
Marginal Cost
$6
$7
$8
$9
$10
$11
How many units does the monopolist produce?
MR₁
MR2
MR3
MR4
MR5
MR6
MR₂:
MR4:
MR6:
Quantity:
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- Buyers Jay Phillip Johnson Kylie Sofia Willingness-to-Pay $4 $3 $2.5 $2.5 $1.8 Marginal Cost $2 $2 $2 $2 $2 Based on the information provided in the above chart answer the following question. A monopolist decides to sell its product at a profit-maximizing price of $4. The marginal cost of the product for the monopolist is $2. In order to restore social efficiency, the social planner chooses the monopolist's quantity and price. In this case, the social surplus increases by $ The monopolist's price and quantity chosen by the social planner will the social surplus. A monopolist's decision to perfectly price discriminate will profit and profits for the monopolist and i the social surplus.arrow_forwardGive two examples of price discrimination. In each case, explain why the monopolist chooses to follow this business strategy. What are the three reasons that a market might have a monopoly? Give two examples of monopolies and explain the reason for each.arrow_forwardA commodity has a demand of Q = 30 - P and a supply of Q = -4 + P. 1. draw a graph that shows the market equilibrium for each of the following cases: A. A competitive market B. A monopolist sells the product to consumers. C. A monopsonist purchases the product from producers. please label clearly all the curves that you draw and the prices and quantities for each of the three cases.arrow_forward
- Please submit the answer and then watch the video feedback.Farmer Ted sells 1,000 bushels of wheat at a price of $5 per bushel in a competitive market. Wilma sells 5 gallons of water at a price of $5 per gallon in a monopoly market. If both Farmer Ted and Wilma want to sell a higher quantity, what happens to their respective prices? a.Farmer Ted's price remains constant and Wilma's price decreases. b.Farmer Ted's price decreases and Wilma's price remains constant. c.Farmer Ted's price remains constant and Wilma's price increases. d.Both Farmer Ted's and Wilma's prices decrease.arrow_forwardThe Justice Department sued several universities for collectively setting the size of scholarships offered. Explain why the alleged price fixing on the part of universities might be harmful to students.arrow_forwardGive an example of a government-created monopoly. Is creating this monopoly necessarily bad public policy? Explain. Define natural monopoly. What does the size of a market have to do with whether an industry is a natural monopoly? Give two examples of price discrimination. In each case, explain why the monopolist chooses to follow this business strategy. What are the three reasons that a market might have a monopoly? Give two examples of monopolies and explain the reason for each.arrow_forward
- Give typing answer with explanation and conclusion A monopolist has a demand curve given by P = 88 − Q and a total cost curve given by TC = 34 + Q2. The associated marginal cost curve is MC = 2Q. Suppose the monopolist also has access to a foreign market in which he can sell whatever quantity he chooses at a constant price of 60. How much will he sell in the foreign market? What will his new quantity and price be in the original market?arrow_forwardA college has two types fo students: students from middle-income families who have an estimated price elasticity of demand equal to -1.5 and students from lower-income families who have an estimated price elasticity of demand equal to -2.5. The colleges marginal cost for providing one-year's academic credit is $4,500 regardless of which student is receiving the education. a. What annual tuition (price) should the college establish for students from middle-income families?b. What annual tuition(price) should the college establish for students from lower-income families?arrow_forwardEconomics A market faces the following demand curve: Q = 10 - 1/5P, and a cost function: TC = 25Q^2 - 250Q + 200. a) Calculate the price and quantity that maximize profits if the company operates as a monopolist. Calculate the total profit. b) If the government removes entry barriers and the market becomes perfectly competitive, calculate the price, quantity, and profit of the company. c) GRAPH and mark the changes in consumer surplus, producer surplus, and market efficiency. PLEASE I NEED THE GRAPH. AND ALSO RESPOND IN ORDER PLEASE, STAY WHICH IS A WHICH B AND WHICH IS Carrow_forward
- Question a) You might have experienced differential prices in your daily life. Please share your experience and explain why the service providers were able to charge you different prices at different places? b) How did the service provider, you benefited from, make the differential prices work? c) Do you think Monopoly increases general welfare?arrow_forwardWhich of the following is not a requirement for a successful price discrimination strategy? A. A firm must have market power B. The firm must be able to prevent consumers who buy a product at a low price from reselling it to other consumers at a high price. C. Some consumers must have greater willingness to pay for the product than other consumers, and the firm must be able to know what prices consumers are willing to pay D. The good must be a very expensive goodarrow_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?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.arrow_forward
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