A monopolist faces two separate markets and can price discriminate accordingly. The demand in the first market is Q1 = 345p, and the inverse demand in the second market is P2 = 439 – 4Q2. The total cost of production is c(Q) = 1.5(Q1 + Q2). Answer the following: If rounding is needed, write your answers to 3 decimal places. a) Find the profit maximising price for the first market. b) Find the profit maximising price for the second market.

A monopolist faces two separate markets and can price discriminate accordingly. The demand in the first market is Q1 = 345p, and the inverse demand in the second market is P2 = 439 – 4Q2. The total cost of production is c(Q) = 1.5(Q1 + Q2). Answer the following: If rounding is needed, write your answers to 3 decimal places. a) Find the profit maximising price for the first market. b) Find the profit maximising price for the second market.

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

A city in a developing country does not have a provider of water and sanitation services, leading to poor health outcomes for its citizens. A firm is considering entering that market. The cost curve is C(q) = 10+2q, and the inverse demand is P(q) = 10—q. The government of that city knows that, because of the high fixed cost to operate in this market, any entrant is likely to become a monopolist. Thus, they decide to implement the following regulation: the firm is not allowed to choose a price above an upper limit of p (which the government chooses and sets in the law before the firm decides to enter). There will be no transfers between the government and the firm. Assume that the firm only enters the market if it can get profits of at least zero, given the government's choice of p. Suppose that the government's goal is to maximize consumer surplus. Which of the following statements is the most correct? (a) The government needs to set p = 2, because it's the marginal cost. That…
A firm charges different prices, P1 and P2, for its domestic and industrial customers. The corresponding demand functions are P1 = 125 - 2Q1; and P2 = 310 - 3Q2. The total cost function is TC = 2000 + 30Q. Determine the value of Q, sum of Q1 and Q2, that maximizes profit with price discrimination. Note: Round to 1 decimal place (type the value with no additional text or explanation).
A monopolist faces two geographically distinct markets, say market 1 is New York and market2 is California. The inverse demand curves in each market are P1 = 300 – Q1 and P2 = 200 – Q2. Themonopolist’s total cost function is C(Q) = 0.5Q^2 + 50Q and marginal cost function is MC(Q) = Q + 50,where Q = Q1 + Q2 is the total quantity that it produces. Your job is to find out how much quantity to sellin each market in order to maximize profit.a) Carefully express this monopolist’s profit maximization problem.b) State the two equations that characterize the profit-maximizing amounts of Q1 and Q2, given an interiorsolution with positive quantities sold in each market.c) Solve these two equations for Q1* and Q2*.d) Find the prices P1* and P2* that the monopolist should charge in each market.
A pharmaceutical company is the only producer of a particular drug. It sells that drug in two countries, one rich and the other a development country. The inverse demand for the drug in the rich country is pr(qr) = 20 – 2qñ, and in the developing country it is pp(qp) 10- qp. The total cost of production is C(qR, qp) = (qr+qp)². What is the profit-maximizing quantity in the rich country, qR? (a) qR = 1 (b) qR = 3 (c) qR = 6 (d) qR 8 (e) qR 14
A monopolist has a constant marginal cost of £2 per unit and no fixed costs. He faces two separate markets in the United States and in the UK. The goods sold in one market are never resold in the other. He sets one price P1 for the US market and another price P2 for the UK market (both measured in £). The demand in the United States is given by Q1=7,000-700P1 and the demand in the UK is given by Q2=1,200-200P2. Calculate the profit maximising output produced and price charged in each country by the price-discriminating monopolist and comment in which country the price charged is higher and by how much.
Monopoly Market demand is P=64-(Q/7). A multiplant monopolist operatesthree plants, with marginal cost functions: MC1(Q1)=4Q1 , MC2(Q2)= 4, MC3=6+Q3. How many products should be produced in eachplant?
Q4-11: Suppose we have a monopolist supplying two different markets. The demand in these markets is given by two types of consumers, each buying exactly one unit of the product a monopolist is selling so long as their consumer surplus is non-negative. If the consumer has a choice, she or he will buy the product that gives them the highest consumer surplus. the monopolist has estimated the indirect utility (CS) of each type of consumer as V₁ = 7z₁ - P₁ V₂ = 222 - P2 == where = {1,2} is the quality chosen by the monopolist i.e. vertical differentiation. The monopolist does not know each consumer's type. There are 397 type one consumers and 107 type two consumers. Finally suppose the marginal cost for all quantities is given by e(z) = 2. Q4-1: What are the lowest qualities type 1 and 2 consumers will demand. Q4- 3: What are the incentive compatibility constraints for type 1 and 2 Q4-4: The monopolist has three options: ■Sell only to high type consumers ■ Sell to both consumers the same…
**Practice**
A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 90 - Qa' and the Japanese inverse demand function is P₁ = 80 - 2Qj, where both prices, På and p₁, are measured in dollars. The firm's marginal cost of production is m = $25 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $ (round your answer to the nearest penny) The equilibrium price in the U.S. is $. (round your answer to the nearest penny)
A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 120-Q₂. and the Japanese inverse demand function is P₁ = 100-2Q₁ where both prices, p, and p,, are measured in dollars. The firm's marginal cost of production is m = $20 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $. (round your answer to the nearest penny)
Suppose that a Monopolist is attempting to pioneer the market for a new good. This product is unique enough that there are no close substitutes, and there is no threat of entry. The monopolist anticipates facing the demand function P=80-Q. The monopolist has a fixed cost of 900 and a total variable cost of VC=10Q and marginal cost of MC=10. Suppose the firm considers setting a uniform price to maximize its profit. Will the firm be profitable? Now suppose that the realized demand is lower than the firm anticipated: P=60-Q. Is the firm profitable? Continue to assume that the demand curve is P=60-Q. Fans of the product worry that the firm might go under, and to help save it every consumer agrees to pay his willingness to pay for each unit of output. Is perfect first degree price discrimination enough to save the firm (is the firm profitable under first-degree price discrimination)? Continue to assume that the demand curve is P= 60-Q. Suppose the new good is a Golf Course (so units of…
A monopolist produces a unique product in three different plants, each with its own marginal cost structure. The overall market demand for the product is governed by the demand function = 128 - 8* P,where is the total quantity demanded, and Pis the market price. To meet this demand, the monopolist must decide on the allocation of production quantities Q1, Q2 and Q3 across Plant 1, Plant 2, and Plant 3 respectively. The marginal costs (MC) for producing the good in each plant are as follows: MC₁ = 1, MC₂ = 1 + 2 and MC3Q3. How many units should the monopolist optimally produce in Plant 1 to contribute to the total market demand 62 units O unit 63 units