Suppose a natural gas distribution company has capital investments of 88 million and a capital cost...
Suppose a natural gas distribution company has capital investments of $8 million and a capital cost r of 10%. The firm’s operating, billing, and maintenance costs are $200,000. The firm buys natural gas at the city gate price of $5/MCF to sell to its customers. The firm distributes gas to those customers through its existing pipeline network at close to zero marginal cost. The firm faces the following (inverse) demand by customer type (recall that these are average demand per...
Suppose that you own a bakery that sells cookies. Each cookie has a marginal and average cost of $1, there are no fixed costs. You notice that all of your customers have the same demand curve for cookies given by p=5 - Q Compute the optimal single price to charge for cookies. How many cookies does each customer purchase? How much profit does your bakery make per customer? What is the consumer surplus at the price and quantity you found...
Hi, i need help with this question 1. The city's Water and Sewer provider is a regulated natural monopoly that has a cost function, C(Q,N) 1,000 +4N+3Q, where N is the number of households, and Q is the cubic inches of water consumed per day. There are 50 high type consumers each with demand, and 30 low type consumers with demand, Each q is cubic inches consumed per household per day. Start with the assumption that the monopolist is profit...
Suppose a profit-maximizing monopolist has total cost and marginal cost as follow. TC =8Q + 10 and MC = 8. It faces the demand curve P=20-1/5Q. What is the equilibrium price and output? What is the total profit? Calculate the consumer surplus, producer surplus, and deadweight loss if the firm acts as a monopolist. Illustrate your answer with a diagram. Calculate the consumer surplus, producer surplus, and deadweight loss if the firm acts as a perfectly price-discriminated monopolist. Illustrate your answer with a diagram.
2. Laredo Gas Company is the sole producer of natural gas in Laredo. The company's operations are regulated by the City Energy Commission. The demand function for gas in Laredo has been estimated as P=1,800 - .3Q where Q is output (measured in units) and P is price (measured in dollars per unit). The company's cost function is: TC = 360,000+ 120 + Q2 This total cost function does not include a "normal" return on the firm's invested capital of...
Exercise 5. Dayna's Doorstops, Inc. (DD) is a monopolist in the doorstop industry. Its cost is C 100 - 5Q+ Q, and inverse demand is P 55 - 2Q a. What price should DD set to maximize profit? What output does the firm produce? How much profit and consumer surplus does DD generate? b. What would output be if DD acted as a perfect competitor and set MC P? What profit and consumer surplus would then be generated? c. What...
Exercise 5. Dayna's Doorstops, Inc. (DD) is a monopolist in the doorstop industry. Its cost is C = 100 –5Q+Q?, and inverse demand is P= 55 – 20. a. What price should DD set to maximize profit? What output does the firm produce? How much profit and consumer surplus does DD generate? b. What would output be if DD acted as a perfect competitor and set MC = P? What profit and consumer surplus would then be generated? c. What...
Consider a city that has cell phone case stands operating throughout the midtown area. Suppose each vendor has a marginal cost of $5.00 per case and no fixed cost. Suppose the maximum number of cell phone cases that any one vendor can sell is 70 per day. If the price of a cell phone case is $15.00, how many cases does each vendor want to sell? B. If the industry is perfectly competitive, will the price remain $15.00 per case?...
1. Suppose there are two type of customers for a comic book store, teenage buyers (type 1) and college-aged buyers (type 2). The owner has conducted interviews and concluded that there are 60 teenage customers, each with an inverse demand curve P = 15 - 5Q. The owner found there are 45 college-aged customers, each with inverse demand curve P = 15 - 3Q. Here, P is the price and Q is the quantity demanded. (a) What is the bookstore's...
A natural monopolist has the total cost function c(y) = 350 + 20y, where y is its output. The inverse demand function for the monopolist’s product is p = 100 – 2y. a) The firm is required by law to meet demand at a price equal to its marginal costs. Calculate the output, the price, profits of the firm, consumers’ surplus and the deadweight loss in the market if the firm To complies with this law. b) Suppose now that...