A monopolist faces the following aggregate demand function: Q = 28 - 1/2 P. Total production costs for the firm are TC(Q) = 40Q. Calculate the consumer surplus, producer surplus, and profits in equilibrium. Then, suppose that the monopolist decides to spend 10 to purchase a patent that would allow her to decrease total costs by 4 per unit. Find the new equilibrium quantity, price, new consumer surplus, producer surplus, and profits to the monopolist after the purchase of the patent.

A monopolist faces the following aggregate demand function: Q = 28 - 1/2 P. Total production costs for the firm are TC(Q) = 40Q. Calculate the consumer surplus, producer surplus, and profits in equilibrium. Then, suppose that the monopolist decides to spend 10 to purchase a patent that would allow her to decrease total costs by 4 per unit. Find the new equilibrium quantity, price, new consumer surplus, producer surplus, and profits to the monopolist after the purchase of the patent.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The following graph shows the demand (D) for cable 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 cable 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. Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The cable company is experiencing economies of scale. The cable company must own a scarce resource. The cable company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True False
In the figure provided, a monopolist faces a market demand represented by Q(P), where is the total quantity demanded, and P is the price of the good. The figure also displays Marginal Cost (MC), Average Total Cost (ATC), Average Variable Cost (AVC), and Marginal Revenue (MR) curves. Additionally, P* and Q* represent the short-run equilibrium price and quantity, respectively. Q DMR MC AT C Avc P(Q) Based on the graphical representation, which of the following statements is true? The monopolist realizes a profit in the short run. The monopolist faces a loss in the short run and decides to shut down. The monopolist incurs a loss in the short run but decides to continue operating.
Suppose that a monopolist, who sells all units at a uniform price, faces an inverse market demand curve P=100- 2Q. a) If there is no cost of production, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variables, showing how you determined them. b) If the firm’s total cost were instead positive, given by the function TC=10Q, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variables, showing how you determined them.
Let a firm have a cost function C = 100 +5Q2. (a) If the firm can sell as much product as it wants at a price P = 100, how much will it produce and what will her profit be? (b) If the firm is a monopoly and faces a demand function P = 200 – 5Q. Determine the firm's output, price, and profit. (c) At what level of output is the monopolist's revenue maximized and what is the profit in this production?
A monopolist faces the following market demand function: D(P) = 100 – P and has total costs equal to TC(Q) = 100 + 100 Show that the monopolist's cost function is subadditive for all relevant levels of demand (for all Q< 100). (Hint: Let EN Qi = Q be a way to split up the total production of quantity Q in N different firms. You can then use the fact that the minimum of EN Q? is reached at Qi = 8.)
Consider a monopolist who faces the following demand function P = 100 – 2Q. The firm’s cost function is given by C(Q) = 10 + 2Q What are the profit maximizing output and price? What is the profit at this point?
Suppose a monopolist has a revenue function: R(y) = 20y Suppose further their cost of production is c(y) = 10y. Which of the following is true when the monopolist produces the optimal quantity? None of the other answers are correct Price is 10 Output is 6 O Price is 6 The cost of production is 25
A monopolist faces two markets with demand functions given by q1 = 120 − p1 q2 = 120 − 2p2 The monopolist has no fixed costs of production, and the marginal cost of production is $10. Suppose the monopolist charges the price $80 per unit of output. What is the market demand at this price? Suppose that the monopolist charges different prices per unit of output in the two markets. How much output is produced? What are the prices? What is the monopolist’s profit?
Suppose that a monopolist’s demand curve is P = 9 – 2*Q. Marginal cost is expressed as follows: MC = 0.5*Q. What is the profit-maximizing price (P) the monopoly should set? What would be the output (Q) at that price? What are the current values for the consumer and producer surpluses (CS and PS)? Is it possible to calculate the profit made by the monopolist? If so, how much is it? If not, what other information would be needed to do that? What would be the 2 key options for a government regulator to increase the consumer surplus (CS) and reduce the producer surplus (PS)? Explain briefly the pros and cons of one of the options!
A monopolist faces two markets (think of it as a domestic market and a foreign market). The demand functions of the two markets are respectively: Q 1 =100 - P 1 ; Q 2 =180 - P 2 The cost function of the monopoly firm is: TC = 40Q. Q1: If this firm charges a uniform price, what price should maximize its profit? What is the total profit? Q2: If this firm charges a Third Degree Price Discrimination, what is the equilibrium price for each market in order to maximize profits? And what is the profit of each market and the total profit?
Suppose a monopolist faces a market demand that is the first two columns in the table below. Also, in the short run, assume that Total Fixed Cost equals $100 and the monopolist has Total Variable Cost according to the table. Find Total Revenue for each price and quantity combination, and then Marginal Revenue as price falls and quantity increases. Fill in the rest of the costs in the table and find profit at each price and quantity combination as the difference between Total Revenue and Total Cost. If profit is less than zero that indicates a loss. What is the maximum profit you found in this table? At what quantity and price combination is profit maximized for this monopolist?
The inverse demand function of a monopolist is p(y) = 12 – y, and total costs is C(y)= y2 -20y +10. a. What is the profit-maximizing level of production? b. Suppose the government decides to tax the monopolist so that for each unit the monopolist sells it has to pay a tax of $2. What is the optimal output under this tax? c. Suppose the government now imposes a tax of 10% on the monopolist’s profits. What is the optimal output under this tax?