A metal-producing firm has market power. Its MC curve can be represented by MC=60+2q, and it...
A metal-producing firm has market power. Its MC curve can be represented by MC=60+2q, and it faces a demand curve of P=200-1.5q. What is the profit-maximizing output? Price? Provide a graph to supplement your analysis. (Note MR=200-3q). What would the price and quantity be if this market were perfectly competitive (ie. these Demand and MC curves were those for the market as a whole, with many firms)? What is the deadweight loss associated with the market power in this case?
Homework Answers
Under monopoly, profit maximizing condition is where MR = MC.
Under perfect competition, profit is maximized where P = MC.
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A metal-producing firm has market power. Its MC curve can be
represented by MC=60+2q, and it...
A monopolist faces a demand curve P = 210 - 3Q and faces a constant marginal cost MC = 15.
A monopolist faces a demand curve P = 210 - 3Q and faces a constant marginal cost MC = 15. a) Calculate the profit-maximizing monopoly quantity and compute the monopolist's total revenue at the optimal price. d) Suppose that this monopoly opens for competition and the market becomes perfectly competitive. The firms face constant marginal cost MC = 15. Find the long-run perfectly competitive industry price and quantity.
5. A monopolist faces a demand curve P = 60 – 2Q and initially faces a...
5. A monopolist faces a demand curve P = 60 – 2Q and initially faces a constant marginal cost MC = 4. (a) Calculate the profit-maximizing monopoly quantity and price, and compute the monopolist's total rev- enue and profits at the optimal price. (b) Suppose that the monopolist's marginal cost in- creases to MC = 8. Verify that the monopolist's total revenue goes down. (c) Suppose that all firms in a perfectly competitive equilibrium had a constant marginal cost MC...
1) The Fox Company has market power (faces a downward-sloping demand curve). The industry's total cost...
1) The Fox Company has market power (faces a downward-sloping demand curve). The industry's total cost is C= 30Q +1.5Q^2 and its inverse demand is P = 300 - 3Q. *What is the firm's profit-maximizing output and price? *If the firm's inverse demand changes to P = 240 - 2Q and its total costs remains unchanged, what is the firm's profit-maximizing level of output and price? State how this compares to the answer for the first bullet point. *Sketch a...
1. You have the following information about a monopolist p = 60 − 2q (1) MR...
1. You have the following information about a monopolist p = 60 − 2q (1) MR = 60 − 4q (2) MC = 40 (3) where equation (1) is the demand curve, equation (2) is the marginal revenue function, and equation (3) is the marginal cost function, assumed to be constant here. (i). Under the perfect competition outcome, what would be the profit-maximizing level of output (qc) and price (pc)? (ii). Under the monopoly outcome, what would be the profit-maximizing...
1. Let the market demand curve be P=1000 - 10Q. Assume the market is controlled by...
1. Let the market demand curve be P=1000 - 10Q. Assume the market is controlled by a monopolist. Let fixed cost be $10,000 and Marginal Costs (MC)=20Q. a) What is the profit maximizing output? b) What is the monopolist's total revenue at the profit maximizing output? c) How much profit is the monopolist earning? d) Assume the government breaks up the monopolist in order to create a perfectly competitive market of identical firms. Assume the MC curve is now the...
Assume that a single price monopolist has a marginal cost curve given by MC=10+2Q. Further the...
Assume that a single price monopolist has a marginal cost curve given by MC=10+2Q. Further the demand curve that it faces is given by p=250-Q. Compared to a perfectly competitive industry with the same demand and cost equations, the loss in consumer surplus in this market equals: O 1600. 1800. O 1200 O 1400
2. Consider a dominant firm in a market with a competitive fringe. The market demand curve...
2. Consider a dominant firm in a market with a competitive fringe. The market demand curve is given by P = 100 − Q.The supply curve of the competitive fringe is perfectly elastic and given by P=Pf. The dominant firm has a marginal cost c where Pf > c (a) For what value of Pf is the presence of the competitive fringe binding on the dominant firm? (b) Suppose the dominant firm has c = 0 and the competitive fringe...
The inverse demand curve for a firm with market power is P = 120 – Q,...
The inverse demand curve for a firm with market power is P = 120 – Q, and its marginal cost is given by MC = 2Q. If the firm is able to practice perfect first-degree price discrimination (instead of behaving as a single-price monopolist), the deadweight loss will _________ (increase or decrease) from $ _______ to $ _______ .
A firm with market power has an inverse demand curve of P = 450 - 5Q...
A firm with market power has an inverse demand curve of P = 450 - 5Q and marginal cost of MC = 400, where Q is measured in thousands. What is the deadweight loss from market power at the firm's profit-maximizing output level? $15,000 $280,000 $22.500 $9.400
In a market demand and supply equations are: The demand curve is given as: P =...
In a market demand and supply equations are: The demand curve is given as: P = 50 - 3Q The supply curve is given as: P = 10 + 2Q Assuming a perfectly competitive market: 1) What is the equilibrium price and quantity?
5. A monopolist faces a demand curve P = 60 – 2Q and initially faces a constant marginal cost MC = 4. (a) Calculate the profit-maximizing monopoly quantity and price, and compute the monopolist's total rev- enue and profits at the optimal price. (b) Suppose that the monopolist's marginal cost in- creases to MC = 8. Verify that the monopolist's total revenue goes down. (c) Suppose that all firms in a perfectly competitive equilibrium had a constant marginal cost MC...
Assume that a single price monopolist has a marginal cost curve given by MC=10+2Q. Further the demand curve that it faces is given by p=250-Q. Compared to a perfectly competitive industry with the same demand and cost equations, the loss in consumer surplus in this market equals: O 1600. 1800. O 1200 O 1400
A firm with market power has an inverse demand curve of P = 450 - 5Q and marginal cost of MC = 400, where Q is measured in thousands. What is the deadweight loss from market power at the firm's profit-maximizing output level? $15,000 $280,000 $22.500 $9.400
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