Homework Answers
Assume a monopolist faces a market demand curve P = 240 – 1⁄2Q and has the...
Assume a monopolist faces a market demand curve P = 240 – 1⁄2Q and has the short-run total cost function C = Q2. a. What is the profit-maximizing level of output and price? b. What are profits? c. What would price and output be if the firm priced at the socially efficient (competitive) level? d. What is the magnitude of the deadweight loss caused by monopoly pricing?
Practice Question 4. The inverse demand curve a monopoly faces is p = 30 – Q....
Practice Question 4. The inverse demand curve a monopoly faces is p = 30 – Q. The firm's total cost function is C(Q) = 0.5Q² and thus marginal cost function is MC(Q) = Q. (a) Determine the monopoly quantity, price and profit, and calculate the CS, PS and social welfare under the monopoly. (b) Determine the socially optimal outcome and calculate the CS, PS and social welfare under the social optimum. (c) Calculate the deadweight loss due to the monopolist...
The cost of producing y is c(y) 5 +7y. Demand for y is given by 0...
The cost of producing y is c(y) 5 +7y. Demand for y is given by 0 if p > 10 y(p) - -10 if p E (8,10 20 if p E [0,8 a) What are the monopoly price, quantity, profit, and total surplus? b) Suppose the monopoly can price discriminate between the two following sub-markets: 0 if p>10 0 if p >10 7 ifpE (8,10] 10 if p e [0, 8] Y2(p) 3 if pE (8,10 if p E [0,8]...
5. Suppose marginal revenue is positive (MR>0). What does that tell us about the demand elasticity...
5. Suppose marginal revenue is positive (MR>0). What does that tell us about the demand elasticity at that point? a. € > -1 b. € < -1 C. E= -1 d. The demand elasticity is unrelated to the marginal revenue curve. 6. If a single strategy is always optimal, regardless of opponents' strategies, then it is a a. First-mover advantage b. A Nash equilibrium c. Prisoners Dilemma d. A dominant strategy 7. In a market with a monopolist, which of...
Numerical Problem Monopoly A monopoly firm faces a demand curve given by the following equation: P=$500-100...
Numerical Problem Monopoly A monopoly firm faces a demand curve given by the following equation: P=$500-100 solve for P: where Q equals quantity 0 to 40 by 4s Its MC curve is constant at MC=$140 per day. [MC is a horzontal curve) Assume that the firm faces no fixed cost. (Therefore TC=$140*Q] Demand Curve (Average Revenue) Q=($500-PV10 P=$500-100 units per day price per unit TR=PxQTC =TR-TC MR MC SO $1,840 0 560 $0 $1,280 - 460 140 20 $500 $460...
4. A competitive firm faces a price of P = 120. The firm has costs c(q)...
4. A competitive firm faces a price of P = 120. The firm has costs c(q) = . What quantity will firm the produce in order to maximize their profit? 5. A monopolist faces demand D= 120 – 2P. The firm has costs c(q) = {9?. What quantity will the firm produce in order to maximize their profit?
If a monopoly faces an inverse demand curve of p=330-Q, has a constant marginal and average...
If a monopoly faces an inverse demand curve of p=330-Q, has a constant marginal and average cost of $90, and can perfectly price discriminate, what is its profit? What are the consumer surplus, welfare, and deadweight loss? How would these results change if the firm were a single price monopoly? Profit from perfect price discrimination (T) is S . (Enter your response as a whole number) Corresponding consumer surplus is (enter your response as whole numbers): CSESO welfare is W=$...
1. Assume that at a given level of output a monopoly firm has marginal revenue of...
1. Assume that at a given level of output a monopoly firm has marginal revenue of $9, its ATC is $9, and marginal cost is $7. If this firm were to incrementally increase its output then A) profit will increase B) price will increase C) profit w decrease D) price will equal marginal revenue. 2. For a monopoly firm, if AVC = $20, P = $21, and ATC = $22, then the firm should: A) increase production. B) produce at...
Exercise 7. A monopolist faces inverse demand p(y) and cost c(y) with c'> 0 and c"...
Exercise 7. A monopolist faces inverse demand p(y) and cost c(y) with c'> 0 and c" 2 0. Demonstrate that the monopolist sets the price where demand is elastic. (So much for the popular argument that a monopolist manipulates inelastic demand.)
Exercise 7. A monopolist faces inverse demand p(y) and cost c(y) with c'> 0 and c" 2 0. Demonstrate that the monopolist sets the price where demand is elastic. (So much for the popular argument that a monopolist manipulates...
2. Suppose a monopoly firm faces inverse market demand curve p a - bQ. Its average...
2. Suppose a monopoly firm faces inverse market demand curve p a - bQ. Its average total cost (ACc) and marginal cost (MC) both equal c where c >0. Assume that a>0, a> c, and b> 0. Assume that the firm maximizes its profit. Depict and identify the following five concepts graphically (a) (i)the firm's profit-maximizing output QM (ii) the corresponding price PM, (ii) the socially optimal output Q* (iv) the firm's supernormal profit and (v) the deadweight loss. (b)...
Practice Question 4. The inverse demand curve a monopoly faces is p = 30 – Q. The firm's total cost function is C(Q) = 0.5Q² and thus marginal cost function is MC(Q) = Q. (a) Determine the monopoly quantity, price and profit, and calculate the CS, PS and social welfare under the monopoly. (b) Determine the socially optimal outcome and calculate the CS, PS and social welfare under the social optimum. (c) Calculate the deadweight loss due to the monopolist...
The cost of producing y is c(y) 5 +7y. Demand for y is given by 0 if p > 10 y(p) - -10 if p E (8,10 20 if p E [0,8 a) What are the monopoly price, quantity, profit, and total surplus? b) Suppose the monopoly can price discriminate between the two following sub-markets: 0 if p>10 0 if p >10 7 ifpE (8,10] 10 if p e [0, 8] Y2(p) 3 if pE (8,10 if p E [0,8]...
5. Suppose marginal revenue is positive (MR>0). What does that tell us about the demand elasticity at that point? a. € > -1 b. € < -1 C. E= -1 d. The demand elasticity is unrelated to the marginal revenue curve. 6. If a single strategy is always optimal, regardless of opponents' strategies, then it is a a. First-mover advantage b. A Nash equilibrium c. Prisoners Dilemma d. A dominant strategy 7. In a market with a monopolist, which of...
Numerical Problem Monopoly A monopoly firm faces a demand curve given by the following equation: P=$500-100 solve for P: where Q equals quantity 0 to 40 by 4s Its MC curve is constant at MC=$140 per day. [MC is a horzontal curve) Assume that the firm faces no fixed cost. (Therefore TC=$140*Q] Demand Curve (Average Revenue) Q=($500-PV10 P=$500-100 units per day price per unit TR=PxQTC =TR-TC MR MC SO $1,840 0 560 $0 $1,280 - 460 140 20 $500 $460...
4. A competitive firm faces a price of P = 120. The firm has costs c(q) = . What quantity will firm the produce in order to maximize their profit? 5. A monopolist faces demand D= 120 – 2P. The firm has costs c(q) = {9?. What quantity will the firm produce in order to maximize their profit?
If a monopoly faces an inverse demand curve of p=330-Q, has a constant marginal and average cost of $90, and can perfectly price discriminate, what is its profit? What are the consumer surplus, welfare, and deadweight loss? How would these results change if the firm were a single price monopoly? Profit from perfect price discrimination (T) is S . (Enter your response as a whole number) Corresponding consumer surplus is (enter your response as whole numbers): CSESO welfare is W=$...
1. Assume that at a given level of output a monopoly firm has marginal revenue of $9, its ATC is $9, and marginal cost is $7. If this firm were to incrementally increase its output then A) profit will increase B) price will increase C) profit w decrease D) price will equal marginal revenue. 2. For a monopoly firm, if AVC = $20, P = $21, and ATC = $22, then the firm should: A) increase production. B) produce at...
Exercise 7. A monopolist faces inverse demand p(y) and cost c(y) with c'> 0 and c" 2 0. Demonstrate that the monopolist sets the price where demand is elastic. (So much for the popular argument that a monopolist manipulates inelastic demand.)
Exercise 7. A monopolist faces inverse demand p(y) and cost c(y) with c'> 0 and c" 2 0. Demonstrate that the monopolist sets the price where demand is elastic. (So much for the popular argument that a monopolist manipulates...
2. Suppose a monopoly firm faces inverse market demand curve p a - bQ. Its average total cost (ACc) and marginal cost (MC) both equal c where c >0. Assume that a>0, a> c, and b> 0. Assume that the firm maximizes its profit. Depict and identify the following five concepts graphically (a) (i)the firm's profit-maximizing output QM (ii) the corresponding price PM, (ii) the socially optimal output Q* (iv) the firm's supernormal profit and (v) the deadweight loss. (b)...
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