Assume that a monopolist sells a product with a total cost function: TC=1000 + 500Q +...
Assume that a monopolist sells a product with a total cost function:
TC=1000 + 500Q + Q2
The market demand curve is given by the equation: Q = 500 - 0.25P
A. What price and quantity would be expected if the firm can operate completely unregulated?
B. The firm has asked you to recommend a price and quantity that would be socially efficient. Recommend a price and quantity to the firm.
C. When moving from the socially efficient price and quantity to the monopoly solution:
a. How does consumer surplus change?
b. How does producer surplus change?
c. What is the social cost of the monopoly solution?
D. Calculate:
a. The monopoly rents
b. The Lerner Index of Monopoly Power. Calculate the Lerner Index using both the P-MC formula and the elasticity formula.
E. Graph the information answered in parts (a)-(b).
Homework Answers
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Assume that a monopolist sells a product with a total cost
function:
TC=1000 + 500Q +...
Problem 2: In problem 1, the monopolist sells a product with a total cost function: TC...
Problem 2: In problem 1, the monopolist sells a product with a total cost function: TC = 1,000 + 500Q + Q?. The market demand curve is given by the equation: Q = 500 -0.25P But now assume that the government imposes a $100 per unit tax on Q. (a) Who What price and quantity would be expected if the firm is allowed to operate unregulated except for the imposed tax? Show the tax result on your graph of Problem...
2. A monopolist has a cost function given by TC 250+q+.004q. The inverse market demand for...
2. A monopolist has a cost function given by TC 250+q+.004q. The inverse market demand for boxes is given by p 8-.0010. The monopolist is curranty able to exclude rivals from the market becaus of a spocial governmental zoning rule (a) What is its output and what price does it charge for boxes? (b) Calculate the firm's profit at this output level. (c) Calculate the firm's producer's surplus at this output level. (d) Calculate the consumer's surplus in this situation....
Suppose a profit maximizing monopolist has total cost and marginal cost as follow:
Suppose a profit maximizing monopolist has total cost and marginal
cost as follow:1. Suppose a profit-maximizing monopolist has total cost and marginal cost as follow: \(\mathrm{TC}=0.1 Q^{2}+Q+10\) and \(\mathrm{MC}=0.2 Q+1\). It faces the demand curve \(\mathrm{Q}=35-5^{\mathrm{P}} .(35\) points \()\)a) What are the price, output, and profit for this monopolist?b) Carefully draw the diagram that illustrates your answers.c) What are the equilibrium price, output, and total profit if this is a perfectly competitive market?d) Compare the results between monopoly and perfect...
1. Consider a monopolist facing the demand curve p = 90 - 2q with cost function...
1. Consider a monopolist facing the demand curve p = 90 - 2q with cost function clg)0.252 (a) Find the profit maximizing quantity qm and price pm What are the monopo- list's profits? (b) What is the value of the Lerner index at qm? (c) Find the efficient quantity and draw a graph depicting the deadweight loss under monopoly (d) What is the consumers' surplus under monopoly
2. A monopolist sells a product with a total cost function TC = 1200 +0.502. The...
2. A monopolist sells a product with a total cost function TC = 1200 +0.502. The market demand curve is given by the equation P= 300- a. Find the profit-maximizing output and price for this monopolist. Is the monopolist profitable? b. Calculate the price elasticity of demand at the monopolist's profit-maximizing price. Also calculate the marginal cost at the monopolist's profit-maximizing output. Verify that the IEPR holds.
Consider a homogeneous product industry with inverse demand function p-35 -Q a) Assume that the industry...
Consider a homogeneous product industry with inverse demand function p-35 -Q a) Assume that the industry is initially monopolized by an incumbent firm (firm I) which has the exclusive right to use the state-of-the-art technology summarized by the total cost function C-10q. Find the initial monopoly equilibrium (price, quantity, industry profit, consumer surplus and total surplus) and the associated degrees of concentration (Herfindahl index) and market power (Lerner index) b) Assume now that a new firm (firm N) discovers and...
Consider a homogeneous product industry with inverse demand function p-35 -Q a) Assume that the industry...
Consider a homogeneous product industry with inverse demand function p-35 -Q a) Assume that the industry is initially monopolized by an incumbent firm (firm I) which has the exclusive right to use the state-of-the-art technology summarized by the total cost function C-10q. Find the initial monopoly equilibrium (price, quantity, industry profit, consumer surplus and total surplus) and the associated degrees of concentration (Herfindahl index) and market power (Lerner index) b) Assume now that a new firm (firm N) discovers and...
2. A monopolist has a cost function given by TC -250+q+.004q2. The inverse market demand for...
2. A monopolist has a cost function given by TC -250+q+.004q2. The inverse market demand for boxes is given by p = governmental zoning rule. (a) What is its output and what price does it charge for boxes? (b) Calculate the firm's profit at this output level. (c) Calculate the firm's producer's surplus at this output level. (d) Calculate the consumer's surplus in this situation. 8-.001Q. The monopolist is currently able to exclude rivals from the market because of a...
2. A monopolist has a cost function given by TC 250+q+.004q2. The inverse market demand for...
2. A monopolist has a cost function given by TC 250+q+.004q2. The inverse market demand for boxes is given by p 8-.0010. The monopolist is currently able to exclude rivals from the market because of a special governmental zoning rule. (a) What is its output and what price does it charge for boxes? (b) Calculate the firm's profit at this output level. (c) Calculate the firm's producer's surplus at this output level. (d) Calculate the consumer's surplus in this situation....
A natural monopolist faces the following demand curve: P = 409 - 2Q, its total cost...
A natural monopolist faces the following demand curve: P = 409 - 2Q, its total cost is given by: TC = 12800 + 9Q (marginal cost is the slope of total cost). (a) If the government regulates the monopolist to charge a socially optimal price, what price will it charge and how many units will it sell? How much are the profit, consumer surplus and producer surplus? (b) If it is not a regulated monopolist, what is its profit maximizing...
Problem 2: In problem 1, the monopolist sells a product with a total cost function: TC = 1,000 + 500Q + Q?. The market demand curve is given by the equation: Q = 500 -0.25P But now assume that the government imposes a $100 per unit tax on Q. (a) Who What price and quantity would be expected if the firm is allowed to operate unregulated except for the imposed tax? Show the tax result on your graph of Problem...
2. A monopolist has a cost function given by TC 250+q+.004q. The inverse market demand for boxes is given by p 8-.0010. The monopolist is curranty able to exclude rivals from the market becaus of a spocial governmental zoning rule (a) What is its output and what price does it charge for boxes? (b) Calculate the firm's profit at this output level. (c) Calculate the firm's producer's surplus at this output level. (d) Calculate the consumer's surplus in this situation....
Suppose a profit maximizing monopolist has total cost and marginal
cost as follow:1. Suppose a profit-maximizing monopolist has total cost and marginal cost as follow: \(\mathrm{TC}=0.1 Q^{2}+Q+10\) and \(\mathrm{MC}=0.2 Q+1\). It faces the demand curve \(\mathrm{Q}=35-5^{\mathrm{P}} .(35\) points \()\)a) What are the price, output, and profit for this monopolist?b) Carefully draw the diagram that illustrates your answers.c) What are the equilibrium price, output, and total profit if this is a perfectly competitive market?d) Compare the results between monopoly and perfect...
1. Consider a monopolist facing the demand curve p = 90 - 2q with cost function clg)0.252 (a) Find the profit maximizing quantity qm and price pm What are the monopo- list's profits? (b) What is the value of the Lerner index at qm? (c) Find the efficient quantity and draw a graph depicting the deadweight loss under monopoly (d) What is the consumers' surplus under monopoly
2. A monopolist sells a product with a total cost function TC = 1200 +0.502. The market demand curve is given by the equation P= 300- a. Find the profit-maximizing output and price for this monopolist. Is the monopolist profitable? b. Calculate the price elasticity of demand at the monopolist's profit-maximizing price. Also calculate the marginal cost at the monopolist's profit-maximizing output. Verify that the IEPR holds.
Consider a homogeneous product industry with inverse demand function p-35 -Q a) Assume that the industry is initially monopolized by an incumbent firm (firm I) which has the exclusive right to use the state-of-the-art technology summarized by the total cost function C-10q. Find the initial monopoly equilibrium (price, quantity, industry profit, consumer surplus and total surplus) and the associated degrees of concentration (Herfindahl index) and market power (Lerner index) b) Assume now that a new firm (firm N) discovers and...
Consider a homogeneous product industry with inverse demand function p-35 -Q a) Assume that the industry is initially monopolized by an incumbent firm (firm I) which has the exclusive right to use the state-of-the-art technology summarized by the total cost function C-10q. Find the initial monopoly equilibrium (price, quantity, industry profit, consumer surplus and total surplus) and the associated degrees of concentration (Herfindahl index) and market power (Lerner index) b) Assume now that a new firm (firm N) discovers and...
2. A monopolist has a cost function given by TC -250+q+.004q2. The inverse market demand for boxes is given by p = governmental zoning rule. (a) What is its output and what price does it charge for boxes? (b) Calculate the firm's profit at this output level. (c) Calculate the firm's producer's surplus at this output level. (d) Calculate the consumer's surplus in this situation. 8-.001Q. The monopolist is currently able to exclude rivals from the market because of a...
2. A monopolist has a cost function given by TC 250+q+.004q2. The inverse market demand for boxes is given by p 8-.0010. The monopolist is currently able to exclude rivals from the market because of a special governmental zoning rule. (a) What is its output and what price does it charge for boxes? (b) Calculate the firm's profit at this output level. (c) Calculate the firm's producer's surplus at this output level. (d) Calculate the consumer's surplus in this situation....
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