4. Third-Degree Price Discrimination. A monopolist has two sets of customers: low demand and high demand. Suppose that the demand functions for both types of consumers are given by the following equations: QL-1600-2PL and Qi-4800 - P.The monopolist faces constant marginal cost of $200. Suppose that the monopolist can separate the two groups and charge separate, profit maximizing prices to each. Suppose that cannot discriminate between the two groups (Hint: be careful in your analysis and think of reservation prices) 1. What price will the monopolist set? 2. What is consumer surplus in this case?

4. Third-Degree Price Discrimination. A monopolist has two sets of customers: low demand and high demand. Suppose that the demand functions for both types of consumers are given by the following equations: QL-1600-2PL and Qi-4800 - P.The monopolist faces constant marginal cost of $200. Suppose that the monopolist can separate the two groups and charge separate, profit maximizing prices to each. Suppose that cannot discriminate between the two groups (Hint: be careful in your analysis and think of reservation prices) 1. What price will the monopolist set? 2. What is consumer surplus in this case?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profifits, (d) allocation of resources, and ( e) impact on the distribution of income. Since both monopolists and competitive fifirms follow the MC = MR rule in maximizing profifi ts, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference?
Cost & Figure 15 Revenue $10 per unit MC $9 $8 АТС $7 $6 $5 $4 $3 $2 $1 MR 2 3 4 7 8 10 Quantity (in thousands) Refer to the above Figure 15 which shows cost curves, a marginal revenue (MR) curve and a demand curve faced by a monopolist. If this monopolist is profit maximizing and does not price discriminate, it will produce ( Select ] v units of output and charge a price of [ Select ] per unit. Given its cost curves, we can tell that this monopolist is currently earning [ Select ] economic profit. According to the classical welfare economics, the socially efficient quantity to be produced in this market would be [ Select ] units of output and a socially efficient price would be [Select ] per unit.
2 Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are: Q, = 300 – Pi; Q. = 200 – 0.5 P.; Q = 150 – 0.4P, and Q. = 75 – 0.25P. Cost function is TC = 61,000 – 100Q. a. As an economic adviser, determine the Prices to be charged in the three markets and amount of output to be sold in each market so that total profits can be maximized. b. Calculate the total profit to be made from the strategy of price discrimination and clearly explain how this strategy has aided this monopolist.
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3. Consider a monopolist engine producer and a monopolist car producer. The engine producer has a total cost of 0. Let Pu denote the price chosen by the engine producer. The car producer obtains engines from the engine producer. Each car requires one engine. The car producer has a fixed cost of 0 and a marginal cost of Py. Let PD denote the price chosen by the car producer. The demand for cars is given by QD = 20 - PD. (a) If the two firms are separate, what is the price and quantity of cars sold? (b) If the two firms are separate, what is the sum of the profits for the two firms? (c) If the two firms vertically integrate, what is the price and quantity of cars sold? (d) If the two firms vertically integrate, what is the profit of the resulting firm?
part C D
The diagram at right shows the demand curve, marginal revenue curve, and cost curves for a single-price monopolist that owns the only golf courses on Eagle Island. The monopolist's product is 18-hole golf games. a. Now suppose the monopolist is able to charge a different price on each different unit sold. What would be the total number of rounds of golf sold per week? rounds. (Round your response to the The total number of rounds sold per week is 600 nearest whole number) What would be the price on the last round sold? The price on the last round sold is $200 (Round your response to the nearest dollar) b. What is the value of the consumer surplus if the monopolist cannot price discriminate at all? The value of the consumer surplus is $ 40000 (Round your response to the nearest dollar) c. What is the value of the consumer surplus when the monopolist is practicing this "perfect price discrimination? The value of the consumer surplus is $ (Round your response to the nearest dollar) Price…
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Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact on the distribution of income. Since both monopolists and competitive firms follow the MR = MC rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference?