2.)Market demand in a monopolistic market is represented by P = 40,000 - 2Q with the P as the market price while Q is the market output. Using this demand function, the relevant marginal revenue function will be MR = 40,000 - 4Q. The monopolist' total cost function is given as TC = 50,000,000 + 2Q + 0.5Q? with TC as the total cost level and Q as the output of the monopolist. Relevant marginal cost function will be MC = 2 + Q. Use the information provided in this item to answer the following questions. %3D i.)What is the profit maximizing output and price for this monopolist? What is the maximum profit level of this monopolist? ii.)What is(are) the break even quantity(ies) of this monopolist? iii.)Do you agree that this monopolist is over pricing and under producing? Answer yes or no but justify your answer by comparing the price and output under perfect competition.

2.)Market demand in a monopolistic market is represented by P = 40,000 - 2Q with the P as the market price while Q is the market output. Using this demand function, the relevant marginal revenue function will be MR = 40,000 - 4Q. The monopolist' total cost function is given as TC = 50,000,000 + 2Q + 0.5Q? with TC as the total cost level and Q as the output of the monopolist. Relevant marginal cost function will be MC = 2 + Q. Use the information provided in this item to answer the following questions. %3D i.)What is the profit maximizing output and price for this monopolist? What is the maximum profit level of this monopolist? ii.)What is(are) the break even quantity(ies) of this monopolist? iii.)Do you agree that this monopolist is over pricing and under producing? Answer yes or no but justify your answer by comparing the price and output under perfect competition.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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. Suppose a monopolist producing Q units of output faces the demand curve P = 130 − 4Q. Its total cost when producing Q units of output is T C(Q) = F + 34Q+ 2Q2 , where F is a fixed cost. (a) For what values of F can a profit-maximizing firm charging a uniform price earn at least zero economic profit? (b) For what values of F can a profit-maximizing firm engaging in perfect first-degree price discrimination earn at least zero economic profit.
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For a monopolist with marginal cost of c, where c > 0, facing a market demand of X(p) = a - bp , derive general formulas that determine the monopolist's pricing decisions under the block pricing and two-part tariff price strategies. What is the general formula for profits under each pricing strategy?
8. Suppose a multiproduct monopolist faces the following demand functions: P₁ = 55-Y₁-Y₂ P₂ = 70-Y₁-2y₂ Let the cost function be given by: C(Y₁Y₂) = y +Y₁Y₂ + y² Derive the profit maximizing prices and quantities. 2
5. A monopolist with cost function c(Q)=faces an inverse demand function given by P(Q)= √Q' (a) Find the elasticity of demand with respect to price. (b) Assuming that the monopolist uses MR = MC pricing rule, find his profit maximizing price, p", and output level, q". (c) Find the marginal cost at q" and calculate the Lerner index. (d) Does the monopolist's market power depend on his cost curve? In particu- lar, does it depend on a? Is your answer surprising?
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. Let the demand curve for a monopolist’s product be P = 100 – 2Qd and the marginal cost of production be constant at MC = 10. Suppose that the firm considers moving from a uniform pricing strategy to a two-block tariff where the first block provides 15 units at a price of P1 = $70 and the second block provides an additional 15 units at a price of P2 = $40. How much does the monopolist’s profit rise with this scheme?
3. A monopolist can produce at a constant marginal cost of c5 (that is cost of producing q units is C(q) = 5q. The firm faces a market demand curve given by: q=53-p (a) Calculate the profit-maximizing price-quantity combination for the monopolist. Also calculate the monopolist profits
1.-Dayna’s Doorstops, INC. (DD) is a monopolist in the doorstop industry. Its total cost function C(⋅) is given by the quadratic function of output C(Q) =100 – 5Q + Q2 . The inverse demand function for doorstops P(⋅) is given by the linear function P(Q) = 55 – 2Q . Note that the marginal cost C′(Q) is not constant. (Also, it happens to be negative for 0 ≤ Q < 2.5.) (a) Write down the profit-maximizing problem for DD, and determine its optimal output, QM. (b) Find the profit-maximizing price set by DD, PM and its marginal cost at the output level QM. From these two pieces of information, can you compute the elasticity of demand at that same level of output without taking any derivative? (c) How much consumer surplus CSM and producer surplus PSM and total surplus does DD generate by its profit-maximizing plan? (d) Find the profit-maximizing output, Qc, if DD acted like a price-taker (i.e., a perfect competitor). (e) Find the profit-maximizing price set by DD, Pc, as well as its…
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)?
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