A monopolist with cost function C(q) = ÷q² faces 2 consumers with the following demands: p(q1) = 10 - q1 and p(q2) = 20 – 2q2. Determine prices, quantities to be produced and sold and the monopolist's profits in the following cases: (a) The good can be resold at zero cost among consumers and it is technologically impossible to sell it in bundles of more than 1 unit.

A monopolist with cost function C(q) = ÷q² faces 2 consumers with the following demands: p(q1) = 10 - q1 and p(q2) = 20 – 2q2. Determine prices, quantities to be produced and sold and the monopolist's profits in the following cases: (a) The good can be resold at zero cost among consumers and it is technologically impossible to sell it in bundles of more than 1 unit.

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 graph above shows the cost and revenue curves for a natural monopoly that provides electrical power to the town of Fanaland. If unregulated, the monopolist operates to maximize its profit. (a) Identify the monopolist’s profit-maximizing quantity and price. (b) Assume the town government of Fanaland regulates the monopolist’s price to achieve the allocatively efficient quantity. What price would the government set in order to achieve the allocatively efficient quantity? (c) Will producing the allocatively efficient quantity be economically feasible for the monopolist? Explain. (d) Suppose instead the town government wants to regulate the monopolist to earn zero economic profit. What price would the government set to have the monopolist earn zero economic profit? (e) Based on your answer to part (d), will the deadweight loss increase, decrease, or stay the same as that of the unregulated monopolist? Explain.
Consider a monopolist facing a linear inverse demand curve p(q) = a- bq, where q denotes units of output and b > 0 represents the slope of the inverse demand curve. This rm faces cost function C (q) = F + cq, where F denotes its fixed costs (can contain sunk costs), c represents the monopolist’s (constant) marginal cost of production and assume a > c ≥ 0. Find the socially optimal output level q* which is the value that maximizes consumer surplus (price equals marginal cost). Is it larger or smaller than the profit maximizing output, qm, that you found in part (a)? Is it true that q* = 2qm? Illustrate qm and q* in a graph where price is the vertical axis and q is the horizontal axis. Be sure to include the MR and MC curves as well as the inverse demand curve.
A firm is originally operating as a single-price monopolist that faces a market demand curve P(Q) = 198 –0 and total cost curve equal to TC (q) = 10, 500 + 32Q, with constant MC equal to MC(Q) = 32 for all units produced. Part (a): How much output does the firm produce and at what price is each unit sold for? Part (b): Calculate the firm's profit. The firm now realizes there are actually two distinct groups of consumers that purchase their product, with the following demand functions: P(q1) = 242 – qı P(q2) = 176 – 92 Their total and marginal cost curves have not changed. If the firm wanted to successfully practice third-degree price discrimination: Part (c): How many units of output would they sell to group 1 and how much will each consumer in group 1 pay? Part (d): How many units of output would they sell to group 2 and how much will each consumer in group 2 pay? Part (e): How much profit is earned by the firm when they practice third-degree price discrimination? Part (f): How much…
Consider a monopolist with a total cost function given as C(Q) = 1.5Q2 + 40Q that faces an inverse market demand function P(Q) = 280 − 0.5Q **Calculate the profit-maximizing quantity, price, and economic profits for this monopolist, with the government imposing a $20 per unit tax. Quantity: ? (Round your answer to two decimal places). Price: ? (Round your answer to two decimal places). Economic profits: $ ? (Round your answer to two decimal places).
If a monopolist faces a demand p(q) = 130-3q and costs c(q) = 2q^2, answer: a) What is the quantity this monopolist would sell? b) What is the price they would charge?
All 20 consumers are alike and each has a demand curve for a monopolist's product of p=15 -3q. The cost of production C(Q) =2Q. Let the monopolist charge a price of $PM for qM unit purchased. Find the menu prices that maximize profits? (The buyer pays menu price PM for quantity qM) What is the maximum profit the monopolist can earn in this market? (pi)?
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 thatmarket. The cost curve is C(g) = 10 + 2q, and the inverse demand is P(g) = 10-q. Thegovernment 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? The government needs to set p = 2, because it's the marginal cost. That eliminatesthe…
On the market of good Y there are 50 identical consumers. Each consumer has a demand function q=300-2pGood Y is produced by a monopolist, which is operating with a constant marginal cost of 50 and a fixed cost of 2000. Suppose the monopolist implements a two-part tariff pricing strategy. Calculate the maximum profit
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 monopolist faces an inverse demand curve P(q) = 28 – 3q. The cost curve is C(q) = 10q. What is deadweight loss in this market? (a) DWL = 3 (b) DWL = 27/2 (c) DWL = 19 (d) DWL = 27 (e) None of the above.
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.