Assume demand for a particular product is given by p = 120 - q and firms produce with costs c(q) = cq+F=20q+F, i.e., with a marginal cost of 20 and a fixed cost F. (a) Suppose there is a monopolist in the market. (i) How do average costs depend on output? How do we label this relation and what does it mean? (ii) Derive optimal production, price and profits of the monopolist. For what range of F does the monopolist operate? L s] Suppose a second firm enters the market and the two firms share the market equally, i.e., each firm is still a monopolist but instead of a total demand of q = 120 - p she now faces a demand of q = 60 -0.5p. Derive optimal production, price and profits for one of the two firms. For what range of F do the two firms operate?

Assume demand for a particular product is given by p = 120 - q and firms produce with costs c(q) = cq+F=20q+F, i.e., with a marginal cost of 20 and a fixed cost F. (a) Suppose there is a monopolist in the market. (i) How do average costs depend on output? How do we label this relation and what does it mean? (ii) Derive optimal production, price and profits of the monopolist. For what range of F does the monopolist operate? L s] Suppose a second firm enters the market and the two firms share the market equally, i.e., each firm is still a monopolist but instead of a total demand of q = 120 - p she now faces a demand of q = 60 -0.5p. Derive optimal production, price and profits for one of the two firms. For what range of F do the two firms operate?

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

Please explain correctly and clearly.
Consider the market for good x for which there is one firm controlling the market.D(q)=165-10qMC(q)=5q+15MR(q)=165-20qC(q)=2.5q^2+15q+8 (a) Find the point of equilibrium. (b) How many units must the firm produce and sell to maximize its profits? (c) What will be the price the firm will charge to consumers?
Practice Sheet: Market Structure The objective of this sheet is to show you how prices and quantities are determined for each market structure and competition styles. It will also allow you to compare different market outcomes The demand for cookies is given by Q=120-P, where Q is the number of boxes of cookies. Assume a constant unit cost of $10, i.e. ATC=MC-$10. You may use the table below to help you understand the steps, but you don't have to. Price 0 10 20 30 40 50 60 70 80 90 100 110 120 Quantity Profit Perfect Competitive market: Assume the market was perfectly competitive. a. The long run equilibrium P=....... and Q=.. b. Industry profit=...
Consider a market where two firms produce the same product, and compete by choosing the price to charge consumers. There are no capacity constraints and no fixed costs. Consumers purchase from the firm that charges the lowest price, Pmin Aggregate demand is given by Q(Pmin) = 600 – 30pmin. Both firms have marginal costs of c = 15. What is the aggregate quantity produced in this market? And what price do consumers pay? (a) p₁ = = 15, p2 = 20, Q = 150 (b) P1 = P2 = 15, Q = 150 (c) P₁ = P₂ = 20, Q = 0 (d) p₁ = 10, P2 = 15, Q = 300 (e) None of the above options is correct.
Suppose a competitive market with the inverse demand p=100–2q. The pre-innovation marginal cost is constant at 60. A process innovation reduces the marginal cost to 28. A) Show this is a non-drastic innovation. B) Determine the minimal reduction in marginal cost for the innovation to be drastic.
Please solve this problem? THANK YOU
(A) Suppose that the two firms merge. Write down the profit function of the merged firm. Calculate the profit maximizing level of output, the amount of pollution for the merged firm, and its profit. Is the merger Pareto improvement? Why or why not? (B) Suppose that the merger is forbidden by the government. Instead, now the fishery has the property right to water. In other words, anybody who wants to pollute the water needs to buy a pollution right from the fishery. Let the price of the pollution right be Px. Write down the steel mill’s new profit function and the fishery’s new profit function. (C) Calculate the profit maximizing level of output for each firm, the amount of pollution, and the price of pollution right. please, please answer the three questions together..
Digital piracy. Suppose the British rock band Radiohead is about to release its new album In Rainbows. For now, assume the band cannot choose the price of the album, which is set at $10. The (marginal) cost to distribute each copy is $2. (a) If demand for the album is given by p = 100 - q, how many albums will be sold? What will profits be? (b) Draw the demand curve and indicate the price and quantity of albums sold using your answer to (a). Calculate deadweight loss and show this on your diagram too. (c) Suppose that the introduction of the Internet lowers distribution costs to $0 but also allows consumers to pirate the album for free. Assume that consumers who were not willing to pay $10 will pirate the album. If 50% of consumers that were prepared to pay $10 (or more) for the album also pirate for free, what will Radiohead's profits be? What is deadweight loss?
Consider a market in which the demand curve is given by: P = 300 – Q Total costs for the industry is given by TC 20Q. (a) What is the competitive price? What are industry profits? (b) Represent your answers in a graph and shade the area of consumer surplus, producer surplus and any efficiency loss for the market structure. (c) What is the monopoly price? What are profits? (d) Represent your answers in a graph and shade the area of consumer surplus, producer surplus and any efficiency loss for the market structure. (e) Calculate the Lerner Index.
Norah Jones’ (famous for the songs “Come Away With Me” and “Don’t Know Why”) last national concert tour sold an average of 2/3 of the tickets available, with 1/3 of seats left empty at a typical concert. (A.) Suppose the local promoter of each concert is a monopolist with a fixed number of seats in each concert hall. The promoter’s cost is independent of the number of people who attend the concert (Norah Jones received a flat payment independent of the number of tickets sold). If the concert charges a single market price, what factors would be considered in determining the profit maximizing price? (B.) Does the failure to sell out a concert suggest that the concert venue set too high a price? Does the failure to sell out a concert imply that there is deadweight loss? Explain. (C.) How (if at all) does the size of Norah Jones’ flat payment influence the profit maximizing price? Explain. (D.) How would your answers change if the concert hall is able to perfectly* price discriminate…
Each firm in a perfectly competetive market has a long-run total cost of LRTC = 100g – 10q + 100. The market demand is Q* = 2150 – 5P. At the long-run equilibrium price, how many firms will there be in the market? (а) 500 (b) 1,000 (c) 1,200 (d) 2,000 (e) 2,400
Suppose a large of firms have cost function C(q ) = = 72+ 4q+2q 2 and the market demand Q_{D = 712 4p What is equilibrium and the long-run number of firms? (a) Q = 600 and N = 100 (b) Q 688 and V100 (c) Q = 600 and N = = 688 and N = 115 (e) None of the above 115 (d) Q