A monopolist sells a good with network externalities.A continuum of (potential) consumers are uniformly located on the interval [0,1]. The utility of consumeri, located at x;, has utility U; = 2(n + 2)(100 x;) - p if she buys the good and 0 otherwise.-Find the quantity sold at price p = 594 in the stable equilibrium (with striclty positive consumption).Answer:

The problem involves a monopolist selling a good with network externalities, meaning its value…

Answered: A monopolist sells a good with network…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A nightclub manager realizes that demand for drinks is more elastic among students, and is trying to determine the optimal pricing schedule. Specifically, he estimates the following demands: • Under 25: qr = 18 − 5p • Over 25: q = 10 − 2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the nightclub $4 each. (a) Calculate the market demand.
4b. The Parking Services Department on a small college campus has control of 1000 Student parking spaces. The annual demand for these spaces, as a function of the Price, p, for a parking permit, is QD = 2000 - 20p. i. If Parking Services wants to set a Pareto-efficient price but believes a parking space is a rival good, what price will it set? ii. Following a survey, Parking Services determines that a parking space is a non- rival good with the number of times it is shared, a, a function of the price, a = 20 -1/2p. With this information, what is the profit-maximizing price of a permit, and how many students will share a parking space?
5. Exercise 4.5 Roger is a regular consumer of personalized greeting cards with Hofmann photographs. Its demand curve is given by q = 31 -0.5P. Rogelio is a representative consumer of this type of cards so we can assume that the rest of the customers, 1,000 in total, have the same demand curve. The supplier company, Hofmann, can produce each card at a constant average and marginal cost of €2. In the market of personalized greeting cards there are many other companies that offer very similar cards. Consider the following 4 scenarios: (i) Hofmann acts as a perfect competitor. ii) Hofmann acts as a monopolist. iii) Hofmann acts as a first-degree discriminator monopolist iv) Hofmann acts as a second-degree discriminator monopolist and offers each of its customers the possibility to buy the first 15 cards at a unit price of € 32, the next 5 (from € 16 to 20) at a unit price of € 22 and the following 10 (from € 21 to 30) at a unit price of €2. Calculate, for the 4 scenarios proposed, the…
"Vitamin Strong" has the monopoly on the production of vitamin C. It faces geographically separated markets, denoted A and B. The demand on these two markets are respectively QA = 1-PA and QB = 0.5 - PB. The transport and production costs are zero for simplicity. Suppose that the firm chooses to set a local prices for each of the two markets. In this case the optimal prices are PA = and PB=... and would supply A-- and QB=_______ (All numeric ==== answers rounded to two decimals) Blank # 1 Blank # 2 Blank # 3 Blank # 4 N N N A
A firm faces two types of consumers. Consumer A has an inverse demand of P = 120- 10 Q and consumer B has an inverse demand of P = 60-2Q. The firm has a constant marginal cost of $20. Assume the firm does not know which type a given consumer is. She offers to sell the good at a price of 70$ per unit. However, if the customer buys 10 or more units, she will offer a quantity discount and charge only 40$ per unit (including the first 10). Which consumer will use the price discount? Both consumers will chose the quantity discount. Neither of the two consumers will opt for the quantity discount. Instead, both will purchase at the higher price of 70 and buy less than 10 units each. Customer A will choose the quantity discount and customer B will not choose the quantity discount. Customer B will choose the quantity discount and customer A will not choose the quantity discount. Neither costumer will purchase from this firm at all.
A firm faces two types of consumers. Consumer A has an inverse demand of P = 120-10 Q and consumer B has an inverse demand of P = 60-2Q. The firm has a constant marginal cost of $20. Assume the firm does not know which type a given consumer is. She offers to sell the good at a price of 70$ per unit. However, if the customer buys 10 or more units, she will offer a quantity discount and charge only 40$ per unit (including the first 10). Which consumer will use the price discount? Question 7 options: Neither costumer will purchase from this firm at all. Customer A will choose the quantity discount and customer B will not choose the quantity discount. Both consumers will chose the quantity discount. Neither of the two consumers will opt for the quantity discount. Instead, both will purchase at the higher price of 70 and buy less than 10 units each. Customer B will choose the quantity…
Question 2. 7. commissioned a study that showed the demand by fans for stadium seats (per playing date) to be P- 22 - 0.2Q, where P is the average price of a ticket and Q represents the number of seats (expressed in thousands). The local stadium seats a maximum of 56,000 per game. Suppose the owner offers you 10% of the revenues. If you can only choose a uniform per-ticket price, what is the maximum amount you can carn per game? (Note: Assume that all seats and all games are the same in this problem.) The owner of a baseball team and local stadium has
Each year a new group of high school seniors chooses where they want to attend college. The college faces two identifiably different categories of customers, in-state and out-of-state students. The (inverse) demand equation for in-state students is given by PI=$9000- QI, while demand by out-of-state students is given by PO= $21,000 -9QO. P represents the annual tuition charged by the college and Q represents the number of students who enter as freshmen. The marginal cost of educating an additional student is constant and equal to $3000. Suppose that the Board of Trustees wants to act as a profit-maximizing monopolist in setting price and output. What tuition should they charge for in-state and out-of-state students, and how many of each would enroll each year?
A manager of a nightclub realizes that demand for drinks is more elastic among students and is trying to determine the optimal pricing schedule. Specifically, he estimates the following average demand for his customer types: Under 25: qr =18-5p Over 25: q=10-2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the club $2 to make. If the manager can charge a separate entry fee and a price per drink for each group, what two-part price will the manager set for reach group. Now suppose that once again it is impossible to identify which group the customers belong. Suppose the manager lowers the price of drinks to equal to marginal cost and still wanted to attract both customers, what entry fee would the manager set? Compare the profits earned in parts a) to d). Which scheme would you choose if you could not identify customer type and which would you choose if you could identify customer type.
4.6 Q13
Exercise 4.2 "With respect to the monopoly equilibrium without price discrimination, first-degree price discrimination increases the profit of the enterprise at the expense of reducing social welfare." Do you agree with this statement? Reason your answer and represent graphically.
Suppose the daily market demand for meat in a small town is given by QD = 5/p² 7 where QD is the quantity demanded (pounds of meat), and p is the price per pound of meat. Suppose this market is served by a profit-maximizing monopolist (that is, there is only one butcher in this town), and this seller obtains and the total quantity sold the meat at a marginal cost of $1.5 per pound. The price charged per pound of meat will be $ will be pounds per day. (Round your answers to the nearest four decimals if necessary.)

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