Suppose that a monopoly makes a loss if it charges a uniform price to all its...
Suppose that a monopoly makes a loss if it charges a uniform price to all its customers, but is
able to make a profit if it uses a second-degree price discrimination scheme. Does the price
discrimination bring us closer or further away from efficiency? Why?
Homework Answers
Usually in the case of a second degree price discrimination, the more quantity consumed the less the price would be and in this regard if the Monopoly uses this sort of price discrimination what happens is there different people or consumers actually get to pay different prices and this allows the the Monopoly at times to actually capture the consumer surplus and from the perspective of the Monopoly it's actually beneficial to them in terms of profit but in reality it is moving farther from efficiency or market conditions all in all
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Suppose that a monopoly makes a loss if it charges a uniform
price to all its...
Problem 1. Second Degree price discrimination Suppose all consumers are identical and market demand given by...
Problem 1. Second Degree price discrimination Suppose all consumers are identical and market demand given by p = 100-q. The monopoly's cost function is C(q) q2. (a) Suppose the monopolist cannot discriminate prices and must set a uniform price. Compute price and quantity set by the monopolist. Compute the profit of the monopoly. b) Suppose now that the monopoly can set a two-part tariff. Find the optimal two-part tariff. Compute the profit of the monopolist Problem 2. Third Degree price...
3. The graph below represents a monopoly: Price Marginal Cost 40 - 30 20 Demand 00...
3. The graph below represents a monopoly: Price Marginal Cost 40 - 30 20 Demand 00 150200 Quontity Marginal Revense a) What is the socially efficient price and quantity? b) What is the monopoly price and quantity? c) What is the area of deadweight loss? 4. Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to...
Profit maximization and loss minimization BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. T
. Profit maximization and loss minimizationBYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market.Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for...
22. Suppose a monopoly sells to two identifiably different types of customers, A and B, who...
22. Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA 20-QA, and the inverse demand curve for group B is PB 20-2QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 4, and the monopolist has no fixed costs. If the monopolist practices group price discrimination, what are the profit...
Suppose the monopoly has a constant marginal cost of 0 and can sell its good to...
Suppose the monopoly has a constant marginal cost of 0 and can sell its good to two different groups of customers. One group of “poor” has demand function P = 1.5 – Q; the other – equally large group of “rich” has demand: P = 2 – Q. The seller cannot tell whether a particular consumer is rich or poor, but she knows that there is equal number of both types. What is the optimal pair of two-part tariffs: the...
A monopoly sells in two countries . The demand curves in the two countries are p1...
A monopoly sells in two countries . The demand curves in the two countries are p1 = 12−q1, and p2 = 48−q2. The monopoly’s MC is $4. Now, suppose a long-running trade war between the two countries comes to an end, allowing resales between the two countries. The monopoly is now forced to charge the same price in both countries. The monopoly would have two options: (1) Sell at a price low enough (lower than 12), so that consumers from...
2. Consider a market with one firm. The firm's cost function is c(g)-2, and the market...
2. Consider a market with one firm. The firm's cost function is c(g)-2, and the market demand is Q 1000-P (a) Suppose the monopolist does not exereise any market power and behaves like a competitive firm. Find the equilibrium price, the quantity produced and the firm's profit. (b) Suppose the monopolist exercises market power but does not price dis- criminate (that is, the firm uses MR MC pricing strategy). Find the price the firm charges, the quantity produced, and the...
Scenario #1 200 Scenario #2 Scenario #3 Suppose a price-discriminating monopoly has segregated its market into two...
Scenario #1 200 Scenario #2 Scenario #3 Suppose a price-discriminating monopoly has segregated its market into two sub-markets (Market 1 and Market 2) and can prevent resale between the two. Assume that its marginal cost is $10 and equal to its average total cost of 10. The firm's demand schedule for the first group is glven by the first two columns of the table Market 1 Market 2 18 14 72 518 10 12 70 18 $90 72 70 12...
4-5 and 6E and F 4) Refer to Figure 15-11. Following the entry of Verizon, the subscripsion price talls rom PMt to P...
4-5
and 6E and F
4) Refer to Figure 15-11. Following the entry of Verizon, the subscripsion price talls rom PMt to Pc What is the increase in consumer surplas as a result of this changs A) the area B+C Q) the area D+F B) the area B+C.D D) the area A B 5) Refer to Figure 15-11. What is the size of the deadweight loss prior to Verizon entering the market5) and what happens to this deadweight loss after...
1. Welfare loss due to monopoly (Similar to Chapter 3 Question 10) Suppose that the demand...
1. Welfare loss due to monopoly (Similar to Chapter 3 Question 10) Suppose that the demand for tickets to a game is given by P = 200-0.004A and the corresponding marginal revenue is MR 200-0.008A where A is the number of attendees. Assume that the constant marginal cost of fan attendance is 20 1. What will the price and attendance be with competition 2. How much consumer surplus exists? 3. What are the monopoly price and attendance 4. How much...
Problem 1. Second Degree price discrimination Suppose all consumers are identical and market demand given by p = 100-q. The monopoly's cost function is C(q) q2. (a) Suppose the monopolist cannot discriminate prices and must set a uniform price. Compute price and quantity set by the monopolist. Compute the profit of the monopoly. b) Suppose now that the monopoly can set a two-part tariff. Find the optimal two-part tariff. Compute the profit of the monopolist Problem 2. Third Degree price...
3. The graph below represents a monopoly: Price Marginal Cost 40 - 30 20 Demand 00 150200 Quontity Marginal Revense a) What is the socially efficient price and quantity? b) What is the monopoly price and quantity? c) What is the area of deadweight loss? 4. Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to...
22. Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA 20-QA, and the inverse demand curve for group B is PB 20-2QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 4, and the monopolist has no fixed costs. If the monopolist practices group price discrimination, what are the profit...
2. Consider a market with one firm. The firm's cost function is c(g)-2, and the market demand is Q 1000-P (a) Suppose the monopolist does not exereise any market power and behaves like a competitive firm. Find the equilibrium price, the quantity produced and the firm's profit. (b) Suppose the monopolist exercises market power but does not price dis- criminate (that is, the firm uses MR MC pricing strategy). Find the price the firm charges, the quantity produced, and the...
Scenario #1 200 Scenario #2 Scenario #3 Suppose a price-discriminating monopoly has segregated its market into two sub-markets (Market 1 and Market 2) and can prevent resale between the two. Assume that its marginal cost is $10 and equal to its average total cost of 10. The firm's demand schedule for the first group is glven by the first two columns of the table Market 1 Market 2 18 14 72 518 10 12 70 18 $90 72 70 12...
4-5
and 6E and F
4) Refer to Figure 15-11. Following the entry of Verizon, the subscripsion price talls rom PMt to Pc What is the increase in consumer surplas as a result of this changs A) the area B+C Q) the area D+F B) the area B+C.D D) the area A B 5) Refer to Figure 15-11. What is the size of the deadweight loss prior to Verizon entering the market5) and what happens to this deadweight loss after...
1. Welfare loss due to monopoly (Similar to Chapter 3 Question 10) Suppose that the demand for tickets to a game is given by P = 200-0.004A and the corresponding marginal revenue is MR 200-0.008A where A is the number of attendees. Assume that the constant marginal cost of fan attendance is 20 1. What will the price and attendance be with competition 2. How much consumer surplus exists? 3. What are the monopoly price and attendance 4. How much...
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