Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 9, Problem 10P
To determine
The reason for an identical marginal revenue curve for a perfectly discriminating monopolist is to that of the
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7. Monopoly and Price Elasticity
Consider the relationship between monopoly pricing and the price elasticity of demand.
If demand is inelastic and a monopolist raises its price, total revenue would
and total cost would
Therefore, a
monopolist will
produce a quantity at which the demand curve is inelastic.
Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal-
revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR).
10
Demand
9
8
Inelastic Demand
7
6
Max TR
3
2
1
-1
-2
Marginal Revenue
-3
-4
-5
2
3
4
6
7
8 9
10
Quantity
(Table) Suppose a monopolist faces the demand relationship shown in the table. Marginal revenue for the second unit of output is:
Quantity
Demanded
Price
$10
$8
$7
$5
$3
$2
1
2.
3.
4
O A. $2.
OB. $6
OC. $7.
O D.$21.
Problem 11-04 (algo)
ou are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your
irm have determined that group 1's elasticity of demand is -5, while group 2's is -2. Your marginal cost of producing the product is
630
a. Determine your optimal markups and prices under third-degree price discrimination.
Instructions: Enter your responses rounded to two decimal places.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2 $
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to
place a check mark. For incorrect answer(s), click twice to empty the box.
?At least one group has elasticity of demand greater than 1 in absolute value.
?At least one group has elasticity of demand less than one in absolute value.…
Chapter 9 Solutions
Econ Micro (book Only)
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- What is the usual shape of a total revenue curve for a monopolist? Why?arrow_forwardHow is the demand curve perceived by a perfectly competitive firm different from the demand curve perceived by a monopolist?arrow_forward(Table) Suppose a monopolist faces the demand relationship shown in the table. If the marginal cost is $6, then the profit-maximizing output is (hint: Find marginal revenue) Quantity Demanded Price $10 $8 $7 $5 $3 $2 3\ 4. 5. 6. OA 4 units. O B. 3 units. OC.1 unit. OD.2 units.arrow_forward
- 2) A monopoly faces a demand elasticity of -10 and marginal cost of $2, what is the optimal monopoly price? (Calculate using the monopoly pricing formula) What is the Lerner index?arrow_forward(Figure: Demand, Revenue, and Cost Curves for Thneeds) Use Figure: Demand, Revenue, and Cost Curves for Thneeds. Thneeds and Things is a monopolist in the thneed ("things we need") market. If the government wants to regulate Thneeds so that an efficient outcome is reached, it would impose a price ceiling of: Price of thneeds $100 90 $40. $46. $50. $65. 80 70 60 50 40 30 20 10 0 20 MR D MC ATC 60 100 140 180 220 Quantity of thneedsarrow_forwardP (5) 80 50 0 36 MC 48 MR (thousands) Reference: Ref-Figure: Primary Market of Tickets (Figure: Primary Market of Tickets) Look at the figure Primary Market of Tickets. The figure shows the demand, marginal revenue and marginal cost curves of a monopolist. According to the figure, the price and the quantity of tickets sold by the monopolist are, respectively: A) $50 and 48,000. B) $80 and 36,000. C) $0 and 36,000. D) $50 and 36,000.arrow_forward
- 7. Market demand curve is Q(P)=10-P. There is a monopoly firm in the market with cost structure given by C(q)=2+4q if q>0 and C(q)=0 if q=0. where q is firm's output. (note that since monopoly is the only firm in the market, it provides the market quantity hence q=Q) a. Find and draw the monopolist' average cost and marginal cost curves. b. Find the monopolist's price and quantity. c. Find consumer surplus, monopolist's profits and dead weight loss.arrow_forward(Figure: Profit-Maximization Decision of a Monopolist 1) Price and Coste $15 In the figure, total cost for this monopoly firm is: $66,000. B) $0. $121,000. Quantity $165,000.arrow_forwardOnly typed answer 8. Natural monopoly analysis The following graph gives the demand (D) curve for satellite TV services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local satellite TV company, a natural monopolist.arrow_forward
- version A 22) If a monopoly is operating along the portion of its demand curve where marginal revenue is positive, its A) total revenue increases when price decreases. B) total revenue decreases when price decreases. C) total revenue is zero. D) total revenue remains the same when price decreases.arrow_forward(units) Price per Unit Quantity Demanded Total Cost of Production (dollars) $85 10 $530 80 11 540 75 12 550 70 13 560 65 14 575 60 15 595 55 16 625 A monopoly producer of foreign language translation software faces a demand and cost structure as given in the table. What is the firm's profit-maximizing output and what is the price charged to sell this output? [HINT: Find TR, MR and MC then use the profit maximizing condition] = OA. P $80; Q = 11 = B. P $70; Q 13 C. P $85; Q = 10 O D. P= $65; Q = 14arrow_forwardSubject: Business Economics Q10) A monopolist firm has the following total cost function and demand function and show your calculation. Quantity demand Price Total cost 5 8 20 6 7 22 7 6 25 8 5 29 9 4 34 10 3 40 Explain what price will be charged and what output will be produced.arrow_forward
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