8. Fill in the blanks: Suppose that a monopoly faces the following demand schedule. It costs the monopoly $3 to produce every unit of output and it had FC = $4. P $10 $9 $8 $7 $6 $5 $4 Q 1 2 3 4 7 The firm's optimal quantity is and its optimal price is

8. Fill in the blanks: Suppose that a monopoly faces the following demand schedule. It costs the monopoly $3 to produce every unit of output and it had FC = $4. P $10 $9 $8 $7 $6 $5 $4 Q 1 2 3 4 7 The firm's optimal quantity is and its optimal price is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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O OO The above graph shows the market demand function for a product. Assume that the market is served by a perfectly-price-discriminating monopolist with a constant marginal cost of production equal to $4 (MC = $4) and no fixed cost (FC = 0). The deadweight loss equals: DWL - $72 DWL - $0 DWL- -$48 DWL - $84 DWL-$36 $30 $28 $26 $24 $22 $20 Question 23 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 Esc 3.50 + PRICE (Dollars per can) 3.00 + 2.50 78°F Sunny 2.00 1.50 1.00 + MC 0.50 + F1 1 F2 Ö- @ ATC F3 0+ # F4 F5 ▬ Monopoly Outcome 0 Profit COL F6 Loss O F7 1 F8 n F9 F10 F11 F12 2 Fn Lock ( 1 6/2 Insert Prt Sc
8. Natural monopoly analysis The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per hundred cubic feet) 20 18 16 14 0 0 1 2 3 5 6 7 8 QUANTITY (Hundreds of cubic feet) MR 4 ATC MC 9 10 D Monopoly Outcome (? Which of the following statements are true about this natural monopoly? Check all that apply. In order for a monopoly to exist in this case, the government must have intervened and created it.
Use the following graph of a monopoly market to answer this question: P $13 $10 150 300 Which of the following statements is an accurate interpretation of the graph? This firm engages in perfect price discrimination; 150 of its customers are willing to pay exactly $13, and 150 are willing to pay exactly $10. This firm price-discriminates by selling its product for $13 to the 150 consumers willing to pay at least $13, and selling it for $10 to the 150 consumers willing to pay between $10 and $13. This firm engages in price discrimination by negotiating on price with each of its customers. This firm price-discriminates by selling its product for $13 to the 150 consumers willing to pay at least $13, and selling it for $10 to the 300 consumers willing to pay between $10 and $13. This firm engages in perfect price discrimination; 150 of its customers are willing to pay exactly $13, and 300 are willing to pay exactly $10.
In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Price Quantity (Dollars) (Hot dogs) Competitive Monopoly
Graphically show a monopoly firm that currently sells 250 units of output at a price of $60/unit, where the marginal revenue of the 250th unit is $40, the marginal cost of the 250th unit is $50, and the average total cost at 250 units is $60. [Hint: Based on the information given, is the quantity you’re asked to show the profit-maximizing quantity? Think about what has to be true for profit-maximization.] Based on the graph and assuming the firm attempts to profit maximize (and succeeds), what would happen to price, quantity, MR, MC, and ATC? (rise, fall, or stay the same?)
3. The inverse market demand is P=100 – 2/3Q. The firms have cost functions TC1 = 15 + 3q1+ q1² TC2 = 20 + q2 + 2q2² Q = q1 +q2 a. Assume there is a multiplant monopoly and TC1 and TC2 represents the cost of production in each plant. How much quantity should each plant produce? b. Find the market price. c. Assume there is a multiplant monopoly. Would it make sense for the firm to close one of the plants? d. Does your answer change if TC2 = 20 + q2 + 2q2² changes to TC2 = 1000 + q2 + 2q² ? e. Explain your answer from the prior question- did your production change or remain the same?
Please refer to the figure provided. Imagine that this market could be perfectly competitive, controlled by a monopolist who charges a single price or a monopolist who charges each customer a different price 1. How much is producer surplus if the market is controlled by a single-price monopolist? $ 2. Suppose now the monopolist is able to charge all customers the maximum price they are willing to pay, how much is the producer surplus?
The graph illustrates an industry in which many firms operating in perfect competition are taken over by one firm that operates as a single-price monopoly. Draw the following shapes: 1) the consumer surplus arising from monopoly. Label it CS. 2) the deadweight loss arising from monopoly. Label it DWL 3) the loss of consumer surplus that is a gain to the monopoly as producer surplus. Label it Monopoly's gain. Indicate whether each of the following statements is true or false. At the competitive equilibrium, marginal social benefit equals marginal social cost. At the competitive equilibrium, the sum of consumer surplus and producer surplus is maximized. At the long-run competitive equilibrium, firms produce at the lowest possible long-run average cost. 30- 25- 20 15- 10- 5- Price and cost (dollars per haircut) 0+ 0.0 MR 1.0 2.0 3.0 4.0 Quantity (thousands of haircuts) MSC 5.0
You operate a monopoly with demand, marginal revenue and marginal cost depicted in the graph below. What price and quantity (approximately) should you charge if you want to maximize profit? 10 9 7 MC 6 D 1 MR 1 4 9. 10 Quantity Q* = 5.8 and P* = 4.2 Q 5.8 and P* 2.9 %3D Q = 3.5 and P* 3 Q 3.5 and P* = 6.5 Price 4.
**You only need to answer Question C*
Suppose that the quantity of natural gas demanded in a city is 70 billion cubic meters when the price is $0.24 per cubic meter. The table below shows the total costs for a firm supplying natural gas to this market. Is the firm a natural monopoly? Quantity (billion m³) 20 30 40 50 60 70 Total cost ($ billion) 4.5 6. 9.0 12.0 15.5 19.5 No, because two or more firms could satisfy the entire market demand at a lower total cost than a single firm can. No, because two or more firms could satisfy the entire market demand at a lower average total cost than a single firm can. Yes, because a single firm can satisfy the entire market demand at a lower total cost than two or more firms could. Yes, because a single firm can satisfy the entire market demand at a lower average total cost than two or more firms could.