1. Which of the following will occur in a market characterized as a monopoly? a) The seller will take the market price as given and produce the quantity that maximizes profit at that price b) The seller may refuse to make specific profitable trades in order to maintain an overall higher price c) The seller will need to differentiate between their individual demand curve and the market demand curve when choosing price d) The seller may retaliate against competitors through price wars and advertising

1. Which of the following will occur in a market characterized as a monopoly? a) The seller will take the market price as given and produce the quantity that maximizes profit at that price b) The seller may refuse to make specific profitable trades in order to maintain an overall higher price c) The seller will need to differentiate between their individual demand curve and the market demand curve when choosing price d) The seller may retaliate against competitors through price wars and advertising

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A monopolist faces a demand curve P = 100 – 4Q and initially faces total costTC = 12Q. (a) Calculate the profit-maximizing monopoly quantity and price, and compute the monopolist's total revenue and profits at the optimal price. (b) Suppose that the monopolist's total increases to TC = 44Q. Verify that the monopolist's total revenue goes down. c) Suppose that all firms in a perfectly competitive equilibrium had a combined total cost T C = 12Q. Find the long-run perfectly competitive industry price and quantity. Also what are the combined industry profits and revenue. (Hint: the supply curve is just the marginal cost) (d) Suppose that all firms' total costs increased to T C = 44Q. Verify that the increase in marginal cost causes total industry revenue to go up.
A monopoly faces an inverse demand curve, p(y) = 100 − 2y, and has constant marginal costs of 20. What is its profit-maximizing level of output and price? What is the socially optimal price and output for this firm? (Perfectly competitive solution) What is the deadweight loss due to the monopolistic behavior of this firm? d. Show your work algebraically and graphically.
5) Describe the basic characteristics of the monopoly model and explain how these characteristics affect the ability of a monopolist to earn positive economic profits, both in the short run and over time.
7. A monopolist faces inverse demand p(Q) = 22 - 2Q and has total cost function TC(Q) = 2Q. a. Calculate the equilibrium price, quantity, consumer surplus, and producer surplus if the monopolist must charge all consumers the same price. b. Suppose instead that the monopolist can perfectly price discriminate among consumers. What are the price, quantity, consumer surplus, and producer surplus now? c. Alternatively, the monopolist decides to charge a two-part tariff. What lump sum fee and price per unit should the monopolist charge if consumers are homogeneous?
4) A monopolist faces a market inverse demand function: P = 250 – 5Q and marginal cost function: ATC = MC = 10. Answer the following. If the monopolist employs a single price strategy, what is the optimal quantity produced and price charged. What is the market up and contribution margin from the strategy in part a if Ed = -1.0833. If other firms trying to enter this market had slightly higher cost structures, what would be a good price & quantity mix to limit entry of competition and why (no math needed). If the monopolist could create a bundled good instead of the strategy in part a, what price would it charge and how many units would be sold in the bundle. What are the profits from part a & part d? Which pricing strategy is preferred. EC: Briefly explain why a firm that offers a buy 2 get the 3rd free deal, does not just offer that same product at a 33.33% discount of the normal stated price. Need help with number 2.
6. A monopolist firm has two long-run choices: producing with short-run cost function C(q) = 30 + 5q, or exiting the market. If the inverse demand function of the market is p(g) = 15 – q, will the monopolist shut down in the short run? Will it exit the market in the long run? A. Shut down in the short run; exit in the long run B. Shut down in the short run; not exit in the long run C. Not shut down in the short run; exit in the long run D. Not shut down in the short run; not exit in the long run
Question 2: Suppose a monopoly firm produces bicycles and can sell 10 bicycles per month at a price of $700 per bicycle. In order to increase sales by one bicycle per month, the monopolist must lower the price of its bicycles by $100 to $600 per bicycle. What is the marginal revenue of the eleventh bicycle?
2. A monopolist faces a representative consumer who acts as a price taker and has the demand function as Q(Q) = 200 – 2P. Suppose the monopolist bears the total cost C(Q) = 100 + 20Q + when producing Q units. a. Find the producer surplus of the monopoly if it exercises perfectly price discrimination. b. Find the producer surplus of the monopoly under the optimal two-block pricing. c. If the monopoly sells with two-part tariff T = A + pQ to the consumer, find its optimal A and p.
5) Allowing a monopolist to price discriminate may strictly increase overall social benefit (relative to costs) will decrease overall social benefit (relative to costs), or leave it unchanged will strictly increase overall social benefit (relative to costs)
Blue INK is the only cabel service provider in Gazipur. The diagram below depicts the price, output and costs incurred by Blue INK. Use the graph to answer the following questions: 1. What is the Total revenue generated by Blue INK at the profit maximizing level of output? 2. If the Cable Service Market turns into a Perfectly Competitive Market, what will be the total ammount of the service provided? 3. If the market turns into a Monopoly market again, what will be the total deadweight loss created?
1. A Chinese steel producer has identified two markets. The first has a demand of q = 56 - p, the second of q = 24 - p. The cost function is C = 10+q². a) What is the profit maximizing price and output for the monopolist? You can assume that market segmentation is feasible. b)* Suppose now the monopolist's cost increases to C = 10 + 2q². How is your answer in a) affected? Discuss what happened
2. Consider a monopolist who has a cost function of c(Q) = 5Q. This monopolist faces two consumers, the first having demand q₁(P₁) = 80 - 2P₁ and the second having demand q₂ (P₂) = 50 - P₂. a) Calculate the profit-maximizing price and then the optimal quantity sold to each consumer under uniform pricing, i.e. the monopolist charges the same price for both consumers. What are the monopolist's profits? b) Suppose now that the monopolist can engage in third degree price discrimination. Find the monopolists profit maximizing prices for consumers 1 and 2 (they should be different), and calculate the monopolist's profits. How do they compare to the profits in part (a)?