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- You are the manager of the local movie theatre in a small town. Running a movie has a fixed cost of $2,000, but selling an extra ticket (i.e. accommodating an extra viewer) has zero marginal cost. Below are the demand schedules for your two types of customers: Price $ Adults Teens and Seniors 10 50 9 100 8 200 7 200 50 6 300 100 5 350 150 4 400 200 3 400 300 400 300 1 400 300 If you are to charge a single price (i.e., if price discrimination is prohibited), what price would you set for a ticket to maximize profit? How much profit do you make? Price = $ Profit = $ If you were allowed to price-discriminate, what price would you charge for an adult ticket? For senior/teen ticket? How much profit do you make? Price for adults = $ Price for seniors/teens= $ Profit = $The market structure of the local pizza industry is best characterised by monopolistic competition. Pizza Shack is one of the producers in the local market.The market demand for Pizza Shack is: Qd = 225 – 10P.Pizza Shack’s cost function is: C(Q) = 0.15Q^2Where Q^2 refers to q squared3. Derive the total revenue equation:Consider the long-run equilibrium in a monopolistically competitive market. Which of the following alternatives is correct? (a) Price is equal to marginal cost (b) The equilibrium is cost-efficient: Firms produce at the minimum of the average cost curve (c) The equilibrium is welfare-efficient: There is no deadweight loss (d) There are no barriers to entry: Every firm earns zero profits
- A monopolistic competitor engages in advertising to A) provide information about its good or product B) differentiate its product from those of its rivals C) increase the demand for its good or service D) all of the aboveRefer to the graph below. Which of the statement is TRUE Group of answer choices Marginal Revenue is equal to Price Marginal Revenue is greater than the Price Average Price is less than the PriceThe diagram below illustrates a firm under monopolistic competition: (a) Label the curves Curve I, Curve II, Curve III, Curve IV. (b) Graphically identify profit maximizing output and price (c) Explain how the amount of profit is defined at the maximum-profit output. II II IV Q
- (b) Based on the following conditions compare pure competition, pure monopoly, monopolistic competition, and oligopoly: (i) Flexibility of prices (ii) Expenditures on advertising and sales promotion. (iii) Efficiency in allocation of resources.which of the following explanation does not describe the relationship between generic strategy and alternative competitive strategy? a) process competitive strategy is related to cost-leadership strategy b) costumer competitive strategy is related to differentation strategy c) product competitive strategy is related to differentiation strategy d)none of the aboveHow does advertising impact monopolistically competitive firms? (a) advertising always causes monopolistically competitive firms to experience lower average costs (b) it either causes a firm's perceiveddemand curve to become more elastic, or advertising causes demand for the firm's product to increase.
- Monopolistic competition creates inefficiency because of the markups and excess capacity. The graph below depicts the situation for a hypothetical monopolistically competitive firm. The curves included in the graph are demand (D), marginal revenue (MR), average total cost (ATC), and marginal cost (MC). The graph is not graded, but you can move the point labeled P to help you find the numeric values to answer the questions. Price $ 80 MC M 45 P D ATC Quantity What is the size of the markup on the price? Number $0 What is the size of the excess capacity? Number UnitsBased on the best available econometric estimates, the market elasticity of demand for your firm’s product is −3. The marginal cost of producing the product is constant at $100, while average total cost at current production levels is $175.Determine your optimal per unit price if:Instructions: Enter your responses rounded to two decimal places.a. you are a monopolist.Question 3 a) Maximize the profit for a monopolistic firm producing three related goods, when the demand functions and the cost function are P₁=180-3Q1-Q2-2Q3 P₂=200-Q1-4Q₂ P₁=150-Q₂-3Q3 TC-Q₁²+Q1 Q2+Q2²+Q2 Q3+Q3² b) Use the Hessian for the second-order condition.