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)

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)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps relieve arthritis pain.
1. Consider a monopolist where the market demand curve for the produce is given by P = 520 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50.a. Given the above information, what is this monopolists profit maximizing price and output if it charges a single price?b. Given the above information, calculate this single price monopolists profit.c. At the profit maximizing quantity, what is this monopolists average total cost of production (ATC)?
1. Refer to the figure below when the firm is a monopolist. Price P MC L K J ATC D T W Quaxtity \MR a) If the monopolist maximizes profit, how many units will it produce? b) What price will the monopolist charge? c) What area measure the monopolist's profit? d) What level of output would be socially efficient? 2. A Monopolist is facing a demand schedule that is shown in the following table. Quantity Total Revenue Average Revenue Marginal Revenue Price $35 $32 1 2 3 $29 14 $26 15 $23 $20 $17 $14 6 7 18 19 $11 10 $8 a) Fill out the rest of the table. b) Assume this monopolist's marginal cost is constant at $11. What quantity of output (Q) will it produce and what price (P) will it charge? ------
6
True/False with explanation: Monopolist will never operate in the inelastic portion of the demand curve (assuming that the monopolist is not facing a constant-elasticity demand curve)
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3. Suppose a software monopolist faces two markets for its software, students and professionals. The demand curve of professionals is given by Qp = 200-2Pp and the demand curve by students is given by Qs = 150 - 3Ps. The firm's cost function is C(Q) = 400+5Q. (a) If the firm can price discriminate, what price should it charge in each market to maximize profits? How much profit does it earn? (b) If the firm cannot price discriminate, what price should it charge? Verify that it sells to both markets at this price. How much profit does it earn? Hint: If the firm cannot price discriminate, this means it must treat the two markets as a single combined market.
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