Question 5. Monopolist with Price Discrimination [Ch.15] (Handout 7)Consider a market served by a single producer. The total cost function for this monopolist is TC=050.The monopolist's marginal cost is: MC-Q.Suppose there are two classes of buyers in this market. The demand functions for the two classes are:Class 1: P-10-Q/2 (or Q-20-2P),Class 2: P-14-2Q (or Q-7-P/2)When the monopolist CANNOT distinguish between the two classes, we can graph the market demandcurve and the monopolist's MR as shown in the graphs below.Class IP1071CSIP Class I10 7PACSI14PClass II1410CS IID₂D₁3.220 QSuppose the monopolist acts as a third degree price discriminator. By the following questions, we arefinding the price and quantity pairs that a price discriminating monopolist would set for the two classes.With a third-degree price discrimination, we can graph the market demand curve and the monopolist'sMR as shown in the graphs below.2.8 7Class II7 CS IID₂MR₂D₂MR4 10 20 Q 2 7Page 4PShow Transcribed TextA8.4QMR6 13.56MRMC13.5MC2727a(1) What is the quantity the monopolist will produce?(2) What is the quantity supplied to Class 1? What is the quantity supplied to Class2?(3) What is the price for Class 1? What is the price for Class2?(4) What is the monopolistic price if a single price were set for both classes?(5) What is the profit the monopolist would make if a single price were set for both classes? Is the profitbigger or smaller? (Compare with the case in which a monopolist acts as a thjud degs.pricediscriminator)

Monopoly market structure is defined as the one in which there is single seller in the market. The…

(1) What is the quantity the monopolist will produce? (2) What is the quantity supplied to Class 1? What is the quantity supplied to Class2? (3) What is the price for Class 1? What is the price for Class2? (4) What is the monopolistic price if a single price were set for both classes? (5) What is the profit the monopolist would make if a single price were set for both classes? Is the profit bigger or smaller? (Compare with the case in which a monopolist acts as a third degree price discriminator)

(1) What is the quantity the monopolist will produce? (2) What is the quantity supplied to Class 1? What is the quantity supplied to Class2? (3) What is the price for Class 1? What is the price for Class2? (4) What is the monopolistic price if a single price were set for both classes? (5) What is the profit the monopolist would make if a single price were set for both classes? Is the profit bigger or smaller? (Compare with the case in which a monopolist acts as a third degree price discriminator)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Question 33 Suppose a monopolist faces the demand curve P = 200 – 2Q, has marginal cost curve MC = 2Q, and zero fixed costs. If the monopolist can perfectly price discriminate, which of the following is true? The monopolist sells 33 units at a profit of 3300. The monopolist sells 33 units at a profit of 1650. The monopolist sells 50 units at a profit of 5000. The monopolist sells 50 units at a profit of 2500.
An important difference between a perfectly competitive firm and a monopolist is that 1 only the monopolist attempts to maximize profit 2 only the perfectly competitive firm maximizes profit 3 the perfectly competitive firm faces a horizontal demand curve and the monopolist faces a downward-sloping demand curve 4 only the monopolist maximizes profit at the quantity where marginal cost equals marginal revenue
Suppose a monopolist sells a product to faculty members and students on the campus. If the firm sets a single price, the monopolist produces 5000 units and sell them at the price of $3 per unit. At this price, the price elasticity of demand for faculty member is -2.5. And the price elasticity of demand for students is -1.5. The monopolist is considering whether she should set different prices for the faculty members and students and asks for your advice. The monopolist is thinking about charging faculty members a 10% higher price. The quantity demanded by the faculty members would fall by %. The monopolist is thinking about charging students a 10% higher price. The quantity demanded by the students would fall by %. Who should the monopolist charge more? mention faculty and students and how much
Assume a monopolist faces the demand schedule given below and a constant marginal cost of $2 for each unit of output. From the graph, what would the total marginal revenue and total revenue be?How would you get total marginal revenue and total revenue?
A monopolist faces two markets with demand functions given by q1 = 120 − p1 q2 = 120 − 2p2 The monopolist has no fixed costs of production, and the marginal cost of production is $10. Suppose the monopolist charges the price $80 per unit of output. What is the market demand at this price? Suppose that the monopolist charges different prices per unit of output in the two markets. How much output is produced? What are the prices? What is the monopolist’s profit?
Suppose that a monopolist has a constant marginal cost curve. That is, for each unit of output that the monopolist produces, it costs an additional $30. The monopolist's marginal revenue is MR=120−6Q, where Q is the quantity produced. The demand curve is P=120−3Q. What is the monopolist's profit-maximizing output and price?
The accompanying graph depicts the marginal revenue (MR), demand (D), and marginal cost (MC) curves for a monopoly. 100 a. Place point P1 at the profit maximizing price and quantity 95 assuming that the monopolist can only charge a single price. 90 85 80 75 70 1 b. What are the profits of the firm if it charges a single price? 65 60 55 50 45 40 35 30 25 MC 20 15 Suppose the monopolist able to successfully price 10 discriminate between two groups by charging one group $70 5 MR and charging $35 to the other group. 05 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantity c. What are the firm's profits if it charges the two prices as mentioned above? $ Price and Costs($)
Suppose that a monopolist’s demand curve is P = 9 – 2*Q. Marginal cost is expressed as follows: MC = 0.5*Q. What is the profit-maximizing price (P) the monopoly should set? What would be the output (Q) at that price? What are the current values for the consumer and producer surpluses (CS and PS)? Is it possible to calculate the profit made by the monopolist? If so, how much is it? If not, what other information would be needed to do that? What would be the 2 key options for a government regulator to increase the consumer surplus (CS) and reduce the producer surplus (PS)? Explain briefly the pros and cons of one of the options!
Suppose that a profit-maximizing monopolist faces a demand curve of P = 240 – 4Q, a marginal revenue ofP=240 – 8Q, a marginal cost of 8Q, and an average total cost of 4Q. a. What quantity will the monopolist supply? b. What price will the monopolist charge? c. How much revenue will the monopolist make at the profit maximizing quantity? d. What is the monopolist's total cost at the profit maximizing quantity? e. How much profit will the monopolist make?
Suppose a monopolist faces a market demand that is the first two columns in the table below. Also, in the short run, assume that Total Fixed Cost equals $100 and the monopolist has Total Variable Cost according to the table. Find Total Revenue for each price and quantity combination, and then Marginal Revenue as price falls and quantity increases. Fill in the rest of the costs in the table and find profit at each price and quantity combination as the difference between Total Revenue and Total Cost. If profit is less than zero that indicates a loss. What is the maximum profit you found in this table? At what quantity and price combination is profit maximized for this monopolist?
Use the following demand schedule for a pure monopolist to calculate total revenue and marginal revenue at each quantity. Plot the monopolist’s demand curve and marginal-revenue curve, and explain the relationships between them. Explain why the marginal revenue of the fourth unit of output is $3.50, even though its price is $5. What generalization can you make as to the relationship between the monopolist’s demand and its marginal revenue? Suppose the marginal cost of successive units of output was zero. What output would the single-price monopolist produce, and what price would it charge?
1) If a monopolist is producing a quantity where marginal revenue is equal to $700 and the marginal cost is equal to $700, the monopolist should ________ to maximize profits. pickoneoption: a.decrease production and increase the price b. decrease production and decrease the price c. continue producing at the current price d. increase production and lower the price e. increase production and increase the price 2) In the long run, monopolistically competitive firms like fast-food restaurants operate at a price that pick one: a) drives economic profit to zero b. equals to the average variable cost. c. equals to the minimum average total cost. d. allows them to make a small economic profit. e. equals to the marginal cost.