I don't understand anything on this page 3. Suppose that De Beers is a single-price monopolist in the market for diamonds. DeBeers has five potential customers: Raquel, Jackie, Joan, Mia, and Sophia. Each ofthese customers will buy at most one diamond-and only if the price is just equal to, orlower than, her willingness to pay. Raquel's willingness to pay is $400; Jackie's, $300;Joan's, $200; Mia's, $100; and Sophia's, $0. De Beers's marginal cost per diamond is$100. This leads to the demand schedule for diamonds shown in the accompanyingtable.Quantity ofDiamondsDemandedPrice of DiamondTotal RevenueMarginal Revenue$500$4001$300$2003$1004$0a. Calculate De Beers's total revenue and its marginal revenue. From yourcalculation, draw the demand curve and the marginal revenue curve.b. Explain why De Beers faces a downward-sloping demand curve.c. Suppose De Beers currently charges $200 for its diamonds. If it lowers the priceto $100, how large is the price effect? How large is the quantity effect?d. Add the marginal cost curve to your diagram from part a and determine whichquantity maximizes De Beers's profit and which price De Beers will charge.e. If a policymaker wanted to break up De Beer's and go back to a socially efficientmarket, based on your graph is it better for the consumer to purchase from DeBeer's or when it is a socially efficient market? Please explain from the graphwhy.

DISCLAIMER “Since you have asked multiple question, we will solve the first three question for you as per guidelines. If you want any specific question to be solved then please specify the question number or post only that question.” A) Price of Diamond Quantity of Diamonds demand Total Revenue Marginal Revenue $500 0 0 0 $400 1 400 400 $300 2 700 300 $200 3 900 200 $100 4 1000 100 $0 5 1000 0 Demand Curve Marginal Revenue B) Demand bend is slants downward due to reverse connection among cost and quantity. The demand bend slants downwards because of the accompanying reasons (1) Substitution impact: When the cost of a ware falls, it turns out to be generally less expensive than other substitute products. This instigates the purchaser to substitute the product whose cost has succumbed to different goods, which have now become generally costly. Because of this replacement impact, the quantity demanded of the goods, whose cost has fallen, increases. (2) Income impact: When the cost of a goods falls, the purchaser can purchase greater amount of the product with his given pay, because of a fall in the cost of the ware, customer's real income or buying power increments. This increment actuates the customer to purchase a greater amount of that product. This is called income impact. (3) Number of customers: When cost of a ware is somewhat high, just couple of buyers can stand to get it, And when its cost falls, more quantities of purchasers would begin getting this is on the grounds that a portion of the individuals who already couldn't bear to purchase may now stand to get it, Thus, when the cost of a ware falls, the quantity of its shoppers increments and this likewise will in general raise the market interest for the item. (4) different type of consumption of an item (5) law of reducing marginal utilityC) If the cost is $200, then, at that point, De Beers offers to Raquel, Jackie, and Joan. On the off chance that it brings the value down to $100, it will likewise offer a jewel to Mia. The cost impact is that De Beers loses $100 (the sum by which it brought down the value) each from offering to Raquel, Jackie, and Joan. So the cast impact brings down De Beers' income by 3 $100 = $300. The demand impact is that De Beers sells another diamond (to Mia), at $100. So the demand impact is to raise De Beers' income by $100.

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3. Suppose that De Beers is a single-price monopolist in the market for diamonds. De Beers has five potential customers: Raquel, Jackie, Joan, Mia, and Sophia. Each of these customers will buy at most one diamond-and only if the price is just equal to, or lower than, her willingness to pay. Raquel's willingness to pay is $400; Jackie's, $300; Joan's, $200; Mia's, $100; and Sophia's, $0. De Beers's marginal cost per diamond is $100. This leads to the demand schedule for diamonds shown in the accompanying table. Price of Diamond Quantity of Diamonds Demanded Total Revenue Marginal Revenue $500 $400 $300 $200 $100 $0 2. 3. 4. 5

3. Suppose that De Beers is a single-price monopolist in the market for diamonds. De Beers has five potential customers: Raquel, Jackie, Joan, Mia, and Sophia. Each of these customers will buy at most one diamond-and only if the price is just equal to, or lower than, her willingness to pay. Raquel's willingness to pay is $400; Jackie's, $300; Joan's, $200; Mia's, $100; and Sophia's, $0. De Beers's marginal cost per diamond is $100. This leads to the demand schedule for diamonds shown in the accompanying table. Price of Diamond Quantity of Diamonds Demanded Total Revenue Marginal Revenue $500 $400 $300 $200 $100 $0 2. 3. 4. 5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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I don't understand anything on this page

3. Suppose that De Beers is a single-price monopolist in the market for diamonds. De
Beers has five potential customers: Raquel, Jackie, Joan, Mia, and Sophia. Each of
these customers will buy at most one diamond-and only if the price is just equal to, or
lower than, her willingness to pay. Raquel's willingness to pay is $400; Jackie's, $300;
Joan's, $200; Mia's, $100; and Sophia's, $0. De Beers's marginal cost per diamond is
$100. This leads to the demand schedule for diamonds shown in the accompanying
table.
Quantity of
Diamonds
Demanded
Price of Diamond
Total Revenue
Marginal Revenue
$500
$400
1
$300
$200
3
$100
4
$0
a. Calculate De Beers's total revenue and its marginal revenue. From your
calculation, draw the demand curve and the marginal revenue curve.
b. Explain why De Beers faces a downward-sloping demand curve.
c. Suppose De Beers currently charges $200 for its diamonds. If it lowers the price
to $100, how large is the price effect? How large is the quantity effect?
d. Add the marginal cost curve to your diagram from part a and determine which
quantity maximizes De Beers's profit and which price De Beers will charge.
e. If a policymaker wanted to break up De Beer's and go back to a socially efficient
market, based on your graph is it better for the consumer to purchase from De
Beer's or when it is a socially efficient market? Please explain from the graph
why.

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