Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 9, Problem 3P
A
To determine
For a
Profit maximization condition and its price and output level.
B
To determine
For a monopoly,
Reason behind MR
C
To determine
For a monopoly,
Show
D
To determine
For a monopoly,
If Greeks decide to charge royalty fee per ring from Manufacturer, what would happen to price and output.
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2. Suppose the cost function for a monopoly is given by TC =F+c.q where TC is the total
cost, F is the fixed cost and q is the output of the firm. The demand function for the
monopoly is given by q = A-bP where A > 0 and b > 0. Find out the profit maximizing
price, quantity, and profit for the monopoly. Also find out the expression for the marginal
revenue of the monopoly as well as the elasticity of demand facing the monopoly.
(a) If you are the owner of the only bookstore in a small town, do you have a
monopoly? Explain.
(b) Draw graph and explain the inefficiency of a monopoly firm such as public
sector provision of electricity.
Q5.
The graph below represents a monopoly firm. Answer the questions below. (
a. Briefly explain three ways in which pricing can be set with a regulated monopoly and the intended objective of each pricing method.b. Based on the diagram, if this monopoly firm is unregulated, what will be its profit? Show your calculations.c. Based on the diagram, if this firm is regulated based on social interest theory, what will be its profit? Show and explain your calculations.d. Based on the diagram, if this monopoly is subject to rate of return regulation, what will be the new price, output and profit of the firm? Show your calculations with explanations.e. Based on the diagram, if this is a natural monopoly that is allowed to set its price, what will be the minimum it should set in order to make a profit or break even? Explain your answer.
Chapter 9 Solutions
Econ Micro (book Only)
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- The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinational enterprise that supplies Hi-tech components. Use the graph to answer the questions that follow. "image" i. State the elasticity of the monopoly firm demand curve. ii. Considering the figure, examine the benefits of the characteristics of themonopoly demand curve to ABC Inc. Ltd. iii. Suppose the demand and cost curves result in ABC Inc. Ltd earning aneconomic profit. Do you think ABC Inc. Ltd firm will earn profit in the longrun? Explain your answer. Assume all factors constant. iv. Examine the effects of ABC Inc. Ltd on consumers.arrow_forwardDraw the demand curve, marginal revenue, and marginal cost curves from Figure : , and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose the demand for the monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. What do you think about the result? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward18. What does it mean when a company is a monopoly? Hard to join the market, usually only one company that controls prices within the market. What is this? Monopoly is just a board game? I always win. Companies are exempt from government regulations or assistance. Companies do not have to pay federal taxes when it comes to tax season.arrow_forward
- 1. The market demand for monopoly firm is P=300-4Q and the total cost is C(Q)=50Q+Q?+100. a) How many products this firm should produce in order to maximize its profit and at what price? Calculate profit. Show the profit area on a graph. b) Calculate the consumer, producer surplus and the deadweight loss. c) What will happen to the deadweight loss if the demand increases by 10 units and the demand curve shifts to the right? Calculate the profit with new demand function.arrow_forward1.) Define the following: a.)What is a barrier entry? b.) What is natural monopoly? c.) What is legal monopoly? d.) What is predatory pricing?arrow_forwardA monopolist is faced with the following cost and revenue curves:(picture) a.What is the maximum-profit price and output,total revenue, total cost and profit? b.If the monopolist were ordered to produce 300 units, what would be the market price and how much profit would now be made c.If the monopolist were faced with the same demand, but average costs were constant at £60 per unit, what output would maximise profit? What would be the price now?................................................................................................. (j) How much profit would now be made? ................................................................................... (k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of £40. How much will now be sold? .................................................................................................................................................. (l) What is the marginal revenue at this…arrow_forward
- Question 5 The following figure describes the market demand curve of a monopoly market: 10 Price, cost 9 8 7 6 3 2 1 a. b. C. d. 5 10 15 20 25 30 35 D a). 45 50 55 60 65 70 75 80 85 quantity Draw the marginal revenue (MR) curve for the monopoly given the above market demand curve. If the monopoly firm can produce any output level with the extra cost $3 per unit, how would the marginal cost (MC) curve be? List the mathematical equation and draw the MC curve on the same figure of question The fixed cost for the monopoly company is $25. Find the optimal output level and the related profit/loss for it. There are two proposals concerning the market efficiency: Plan A: regulate the market price at $4. Plan B: allow and help the monopoly enforce the perfect price discrimination. If you represent consumers to vote for one plan, which one would you choose? Explain with proper calculation (Hint: consumers only care about their welfare).arrow_forwardAssume that builder XYZ is a monopoly in Sydney’s Southwest, who specialises in apartment construction. (a) Draw a diagram to illustrate XYZ making economic profits before the implementation of the hard lockdown in Sydney’s Southwest. On your diagram clearly indicate the quantity XYZ is choosing to produce and the price XYZ is choosing to charge. (b) Assuming costs remain constant and that that the construction industry is still allowed to operate normally, explain the impact of Sydney’s lockdown on builder XYZ’s demand from Q2 part (a). With the aid of a new diagram, discuss XYZ’s static profit or loss situation after these changes. Clearly indicate the quantity XYZ is choosing to produce and the price XYZ is choosing to charge. (c) Assume that XYZ survives the lockdown and stays in business. If the NSW government decides to double the first home buyer’s grant, explain the impact on XYZ’s demand. With the aid of a new diagram, discuss XYZ’s static profit or loss situation after this…arrow_forward5. Monopoly versus perfect competition Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D�) and supply (S=MC�=MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Perfect CompetitionPC Outcome045901351802252703153604054505.04.54.03.53.02.52.01.51.00.50PRICE (Dollars per hot dog)QUANTITY (Hot dogs)DS=MC Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand…arrow_forward
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