A monopolist sells a good to two demographically separate markets. The demand forits good in the first marketgiven byQ1 = 24 – P1,(2)while the demand in the second market is given byQ2 = 20 – P2.(3)The monopolist has constant average and marginal costs of $2 per unit.Answer the following: (d) Suppose that each market represents a single consumer and the monopolist cancharge a two-part tariff where each consumer faces the same price per unit andthe same entry (fixed) fee. In this case what should the price of the good andthe entry fee be? What are the monopolist's profits in this case?(e) How does your answer to (b) change if the monopolist's cost function is given byQ?.05Q²,20C(Q)(4)where Q is the total quantity of the good produced for both markets.

Answered: Image /qna-images/answer/4e8d3c8e-1369-4698-b9b5-9229542000c4.jpg

A monopolist sells a good to two demographically separate markets. The demand for its good in the first market is given by Q1 = 24 – P1, (2) while the demand in the second market is given by Q2 = 20 – P2. (3) The monopolist has constant average and marginal costs of $2 per unit. Answer the following:

A monopolist sells a good to two demographically separate markets. The demand for its good in the first market is given by Q1 = 24 – P1, (2) while the demand in the second market is given by Q2 = 20 – P2. (3) The monopolist has constant average and marginal costs of $2 per unit. Answer the following:

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

Suppose that a monopolist sells its product in two countries; Japan and Canada. The monopolist’s marginal cost is $60 and total fixed cost is $100. The direct market demand equations in the two countries are as follows:QJ = 200 − 2PJ and QC = 100 − 0.5PC;where the subscript J denotes Japan and the subscript C denotes Canada. Suppose that the monopolist cannot prevent resale, i.e, the monopolist must charge a single price for both countries.a) Derive the direct total market demand equation, QD = f(P).b) What would be the profit-maximizing quantity (Q*), price (P*), and profit (π*)? Please answer both a) and b). Thank you.
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 wholesaler (upstream firm) sells a product to a retailer (downstream firm). Both the wholesaler and the retailer are monopolists. The wholesaler faces a constant marginal cost of $2 and charges the retailer a wholesale price w. The retailer resells the product to final consumers at price P and the wholesale price w is its only cost. The demand for the good is P = 12 - Q. For your calculations below, assume that both the P and w are measured in dollars per unit. Hint: The retailer's profit function is π = (Pw)Q. a Find the profit-maximizing retail and wholesale prices and quantities.
A monopolist knows there are two customers with different demand curves for two differently sized bags of potato chips. Customer S would only buy the small bag and has a willingness-to-pay given by P=160-2q (where P denotes the price and q denotes the quantity). Customer L would buy the large bag and has a willingness-to-pay given by P=200-q. The monopolist does not know who is customer S and who is customer L. Marginal cost of production is zero. BEFORE second degree price discrimination, and if the monopolist perfectly price discriminated the small bag, what is the price of the small bag?
Suppose that a monopolist has a patent for widgets and the demand curve is given by Q(P) = 12 – 0.02P. The monopolist’s total costs are TC(Q) = 25Q^2 + 500. You may assume that widgets are continuously divisible, like corn oil or sand. a: Find the quantity Q* that maximizes the monopolist’s profit by exploiting the marginalcondition, necessary for profit maximization at an interior solution. Neatly show your work.b: Find the price P* that the monopolist charges. Neatly show your work.c: Neatly graph the marginal revenue and marginal cost curves, with Q on the horizontal axis.d: Label relevant areas on your graph using a, b, c, etc. and fill in the following chart.
A monopolist has discovered that the inverse demand function of a person with income Y for the monopolist’s product is P = 0.002Y-Q where P is the price, Y the income, and Q is the output. The monopolist can observe the incomes of its consumers and hence vary its price accordingly. The monopolist has a total cost function C(Q) = 100Q. 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. Explain if your answer above is as expected by…
Assume a monopolist produces rum and knows there are two groups of rum consumers, 1 and 2, with different price elasticities. Group 1 is highly price elastic with E1=-10; Group 2 exhibits a lower price elasticity of E2=-2.5. Assume the company can separate these two groups (e.g., by handing out special ID cards) and can charge two different prices. If P2=$14, how much can it charge to Group 1?
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.
Hand written solutions are strictly prohibited
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.
A profit maximizing monopolist has a cost function C (q) = q,where q > 0 denotes the amount produced, and faces the aggregate demand curve q = 100/p² where p > 0 denotes the price per unit in the market. Assume that the monopolist chooses an optimal price in the range p E [1, 3]. The optimal price the monopolist would set up is while the Lerner index is_ Blank # 1 Blank # 2
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?