Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 11SQ
To determine
The total cost of the monopolist at the profit maximizing level of output.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Exercise 4.2
"With respect to the monopoly equilibrium without price discrimination, first-degree price discrimination increases the profit of the enterprise at the expense of reducing social welfare." Do you agree with this statement? Reason your answer and represent graphically.
Question 1. In this question we begin by constructing a competitive market for a good, and then compare the
outcome when supply is controlled by a single-price monopolist. Suppose that the demand for units of some
beverage comes from households with the preferences over units of the beverage (x1) and expenditure on all
other goods (x2) represented by the following utility function,
U(x1,x2) = 800 In(x1) + x2
Each household has an exogenous income of I per period. The second 'good' is referred to as a 'composite'
good and is an amount of money. We assume throughout that p2 = 1.
(4 marks) Derive a household's ordinary demand functions, x1(P1, 1,1) and x2(P1,1,1) when they
are price-takers in the market for the beverage. How large does the exogenous income need to be
in order for the household to enjoy a positive amount of both 'goods'?
i)
(2 marks) Suppose there are 80 households who participate in the market for the beverage. Half of
the households have an income of $1200 per period,…
Question 1. In this question we begin by constructing a competitive market for a good, and then compare the
outcome when supply is controlled by a single-price monopolist. Suppose that the demand for units of some
beverage comes from households with the preferences over units of the beverage (x,) and expenditure on all
other goods (x2) represented by the following utility function,
U(x1, x2) = 800 In(x1) + x2
Each household has an exogenous income of I per period. The second 'good' is referred to as a 'composite'
good and is an amount of money. We assume throughout that p2 = 1.
i)
Derive a household's ordinary demand functions, x, (P, 1,1) and x,(P1, 1, 1) when they
are price-takers in the market for the beverage. How large does the exogenous income need to be
in order for the household to enjoy a positive amount of both 'goods'?
ii)
Suppose there are 80 households who participate in the market for the beverage. Half of
the households have an income of $1200 per period, and the other…
Chapter 9 Solutions
Micro Economics For Today
Ch. 9.1 - Prob. 1GECh. 9.1 - Prob. 2GECh. 9.2 - Prob. 1YTECh. 9.4 - Prob. 1YTECh. 9 - Prob. 1SQPCh. 9 - Prob. 2SQPCh. 9 - Prob. 3SQPCh. 9 - Prob. 4SQPCh. 9 - Prob. 5SQPCh. 9 - Prob. 6SQP
Ch. 9 - Prob. 7SQPCh. 9 - Prob. 8SQPCh. 9 - Prob. 9SQPCh. 9 - Prob. 10SQPCh. 9 - Prob. 11SQPCh. 9 - Prob. 12SQPCh. 9 - Prob. 13SQPCh. 9 - Prob. 1SQCh. 9 - Prob. 2SQCh. 9 - Prob. 3SQCh. 9 - Prob. 4SQCh. 9 - Prob. 5SQCh. 9 - Prob. 6SQCh. 9 - Prob. 7SQCh. 9 - Prob. 8SQCh. 9 - Prob. 9SQCh. 9 - Prob. 10SQCh. 9 - Prob. 11SQCh. 9 - Prob. 12SQCh. 9 - Prob. 13SQCh. 9 - Prob. 14SQCh. 9 - Prob. 15SQCh. 9 - Prob. 16SQCh. 9 - Prob. 17SQCh. 9 - Prob. 18SQCh. 9 - Prob. 19SQCh. 9 - Prob. 20SQ
Knowledge Booster
Similar questions
- With regard to market structure, answer the following: (a) A monopolist never produces in the inelastic portion of its demand curve. True or false? Why? (b) Draw a figure showing a monopolist producing at the lowest point on its long-run average cost curve. (c) What is third degree price discrimination? Why does a monopolist practice it? What are the conditions are necessary for the monopolist to be able to practice it? Give a real-world example of third degree price discrimination? (c) If the price elasticity of demand is -3 in market 1 and -2 in market 2 and the price in market 1 is $12, what price should a monopolist practicing third degree price discrimination set in market 2?arrow_forwardIn this problem, the inverse demand function is 100 – Q, and marginal cost is 90 – Q/2. A monopolist dominates this Internet industry. The government orders the firm to produce at the point where the price equals marginal cost. (a) Why might the government think that this level of output would increase economic efficiency? (b) Now calculate the output level at which price equals average cost, and calculate profit. Why might the monopolist prefer this output level to the one in which price equals marginal cost? (c) How can the government induce the monopoly to produce, for years to come, at the point where price equals marginal cost?arrow_forwardYou are considering entering a market serviced by a monopolist You are considering entering a market serviced by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If the monopolist doesn’t engage in a price war, you will each earn profits of $2.There are two possible solutions or equilibria. What are they? You are considering entering a market serviced by a monopolistarrow_forward
- We are given an inverse market demand curve: P = 300 – 0.00006Q and the total cost of production. Assume that the total cost of production is the same for the entire market and the monopolist TC = 11,000,000 + 0.0006Q Explain how the market outcomes of perfect competition and monopoly differ for the given market. Use both mathematical and graphical method. Point out consumer and producer surplus, and total welfare ( No need of diagram )arrow_forwardExercise A.2. Suppose a company that is the only producer in a given sector of activity and can produce with an average and marginal cost of €10. The company faces a market demand curve given by Q=100-P. a) What is the price range in which this monopolist will operate? Why? b) Get the amount you will produce and the sale price you will charge. Calculate its benefits? Represent graphically.arrow_forwardJustify if each of the following statements is TRUE or FALSE. If the statement is TRUE, just write “True”. If the statement is FALSE, explain why it is wrong. a) Pos Malaysia is the sole firm which provides courier services in Malaysia. It is considered a monopolist in Malaysia. b) Sarawak Energy is the sole supplier of electricity transmission and distribution in Sarawak. It is a monopolist in Sarawak. c) Shell Out is a seafood restaurant with many outlets in Selangor and Kuala Lumpur. It is doing business in the perfectly competitive market.arrow_forward
- A monopolist sells 100 units at a price of $10 per unit. The average total cost per unit is $6 per unit. What is the monopolists profit? Question 8 options: a) $200 b) $300 c) $400 d) $500arrow_forwardConsider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, total revenue would (DECREASE OR INCREASE) and total cost would(DECREASE OR INCREASE) . Therefore, a monopolist will (SOMETIMES, ALWAYS, NEVER) 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).arrow_forwardExercise A.3. The inverse demand of a monopolist is given by the expression P=50-2Q and its cost function is C(Q)=Q²+20Q+20. a) Determine the level of production, price and profit of the monopolist. Represent graphically. b) Calculate the monopoly power of the company using the Lerner index. c) Calculate the value of the deadweight loss caused by monopoly power.arrow_forward
- A monopoly firm produces an optimal output of 20 units that are sold at $70 per unit. The firm makes a negative profit and incurs a total variable cost of $1000. Explain what the firm should do? 1) The firm should shut-down operations. 2) The firm should continue to produce at a price of $70 per unit. 3) The firm should continue to produce but increase price to $100 per unit. 4) The firm should continue to produce but lower price to $50 per unit.arrow_forwardIn markets characterized as oligopoly, Question 20 options: a) the oligopolists earn the highest profit when they cooperate and behave like a monopolist b) as the number of oligopolistic firms increase, the price of the product is likely to approach marginal cost c) there is an incentive to restrict output and raise prices between and among a few firms d) all of the abovearrow_forwardA monopolist faces a demand curve P = 100 – 4Q and initially faces total costTC = 12Q. (a) Calculate the profit-maximizing monopoly quantity and price, and compute the monopolist's total revenue and profits at the optimal price. (b) Suppose that the monopolist's total increases to TC = 44Q. Verify that the monopolist's total revenue goes down. c) Suppose that all firms in a perfectly competitive equilibrium had a combined total cost T C = 12Q. Find the long-run perfectly competitive industry price and quantity. Also what are the combined industry profits and revenue. (Hint: the supply curve is just the marginal cost) (d) Suppose that all firms' total costs increased to T C = 44Q. Verify that the increase in marginal cost causes total industry revenue to go up.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning