Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 4.A, Problem 2ARQ
To determine
The reason for licensing.
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Students have asked these similar questions
A local magic shop has a monopoly on the production of magic wands. Each customer wants only one magic
wand, and the table below shows each customer's willingness to pay. The marginal cost of producing a wand is
$21 no matter how many are produced.
Quantity demanded
Price per wand ($)
LO
01 2 3 4 5
6 78
30 27 24 21 18 15 12 96
If the shop can charge only a single price, it will charge $
wands.
If the firm practices perfect price discrimination, it will sell a total of
earn a profit of $|
and sell
wands and
The figure below shows the total cost and total revenue curves for a monopolist. The profit - maximizing
output for the monopolist is 1 unit 2 units 3 units 4 units 5 units
The figure below shows the total cost and total revenue curves for a monopolist. The
profit-maximizing output for the monopolist is
$100
90
80
70
60
50
40
30
20
10
1 unit
0 1 2 3 4 5 6 7 8 9
2 units
3 units
O4 units.
TR
5 units
Q/t
A company sells its product in foreign and domestic markets, as illustrated in the figures below:
Domestic Market
Foreign Market
Price ($) 20
Price ($) 20
18
18
16
16
14
14
12
12
10
10
6.
6
MC
MC
4
4
2-
MR
MR
10
12
4.
8.
10
12
Quantity
Quantity
Suppose the company uses third-degree price discrimination (or segmenting). What is the profit-maximising price in the domestic market?
O a. $8.67
O b. $12.00
Oc.
$7.67
O d. $7.00
Chapter 4 Solutions
Microeconomics
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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Similar questions
- A monopolist has variable costs of VC = q² and no fixed costs and faces a demand curve of P = 24 - q, where P is price and q the quantity sold. What is the monopolist's profit? 072 O 64 None of the other answers is correct. O 48 O 36arrow_forwardScenario 1: Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve, and total cost curve are given as follows: Q = 160 - 4P TR = 40Q- 0.25Q? MR = 40 - 0.5Q TC = 4Q MC = 4 Refer to Scenario 1. How much output will Barbara produce? O A. 56 O B. 22 O C. 72 O D. 0 E. None of the abovearrow_forwardThe following diagram depicts the operating conditions for a profit-maximising monopolist. Calculate the deadweight loss created by this monopoly selling at the profit maximising point. Price ($) MC 10 Demand MR 5 7.5 10 Quantity (a) $4.25 (b) $6.25 (c) $8.25 (d) None of the above. 20 15 LO 20 15arrow_forward
- Table 15-20 A monopolist faces the following demand curve: Quantity Price 0 $30 1 $27 2 3 + $24 $21 $18 5 $15 6 7 8 0 $12 $9 $6 $3 10 $0 Refer to Table 15-20. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to maximize profit? O2 units 3 units 4 units 5 unitsarrow_forward10. Is the demand for a life-saving drug like Daraprim (Front Page Economics "Drugmaker Hikes Price of AIDS Drug 5,000 Percent!") likely to be elastic or inelastic? How does that affect the pricing decision of a monopolist? LO10-1 IT quarrow_forward4. Suppose a textbook monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by Q₁ = 55 - P₁ and the curve in the second market is given by Q2 = 70 - 2P₂. a) If the monopolist charge the same price, how many units should it sell? What price should it charge to maximize its profits? What are profits in this situation? (Answer: Q = 55 units) b) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what price will prevail in each market? What are total profits in this situation? (Answer: Q₁ = 25 units; Q₂ = 30 units)arrow_forward
- Suppose that a monopolist faces linear demand given by Q(p)=90-3"p The monopolist also pays a marginal cost of $2 for each unit produced. What is the price that the monopolist will set to maximize its profits? O 16.5 O 15 O 16 O 15.5arrow_forwardFigure: Maximum Willingness to Pay P $100 75 45 100 100 110 125 2 125 MR MC What is the profit-maximizing quantity for this monopolist? O 110 75 Darrow_forwardIgnore AFC and AVC 2. Suppose a pure monopolist faces the following demand schedule and the same cost data as the competitive producer discussed in problem 4 at the end of Chapter 10. Calculate the missing TR and MR amounts, and determine the profit-maximizing price and profit-maximizing output for this monopolist. What is the monopolist's profit? Verify your answer graphically and by comparing total revenue and total cost. LO11.4 Average Total Average Variable Average Marginal Product Fixed Cost Cost Total Cost Cost 0 $45 1 $60.00 $45.00 $105.00 40 2 30.00 42.50 72.50 35 3 20.00 40.00 60.00 30 4 15.00 37.50 52.50 35 5 12.00 37.00 49.00 40 6 10.00 37.50 47.50 45 7 8.57 38.57 47.14 55 8 7.50 40.63 48.13 65 9 6.67 43.33 50.00 75 10 6.00 46.50 52.50 Price Quantity Demanded Total Revenue Marginal Revenue $115 83 63 55 48 42 29 2 % 522332 100 0 1 2 3 4 5 6 7 37 8 9 10 $arrow_forward
- Price (dollars) 30 27 24 21 18 15 12 9 O 3 units. O 5 units. O 4 units. Quantity demanded O 6 units. 0 1 2 3 4 5 6 7 Marginal revenue (dollars) 0 27 21 15 3 -3 -9 Total cost (dollars) 25 28 33 40 49 Using the data in the above table for a single-price monopolist, how many units of output will be produced? 60 73 88arrow_forward4. Suppose a monopolist can produce any level of output it wishes at a constant marginal cost of c=5. Assume the monopoly sells its goods in two different markets separated by some distance. The demands in the two markets are given by 9₁ = 55-P₁ and 92 = 70-2p2 (a) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this case?arrow_forward: Suppose you are a monopolist and you have two customers, A and B. Each will buy either zero or one unit of the good you produce. A is willing to pay up to $35 for your product: B is willing to pay up to $10. You produce this good at a constant average and marginal cost of $8. If you could practice third-degree price discrimination, you will eam a profit of $arrow_forward
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