Consider a monopolist who chooses to provide special discount to a group of customers with low willingness to pay—say, students, or seniors, or people living in a lower-income country. That kind of behavior cannot be explained by standard microeconomic theory, since a profit-maximizing monopolist would never want to provide any discounts.(a) True. (b) False.
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Consider a monopolist who chooses to provide special discount to a group of customers with low
(a) True. (b) False.
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- Which of the following best explains why the monopolist’s marginal revenue is less than the sales price?A) To sell more units, the monopolist must increase the price on all units sold.B) As the monopolist expands output, its total revenue always will decline.C) When the monopolist reduces price in order to sell more units, it must lower the price of units that could otherwise have been sold at a higher price.D) When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.A monopolist is deciding how to allocate output between two geographically separated markets (East Coast and Midwest). Demand and marginal revenue for the two markets are: P1=20−Q1 MR1=20−2Q1 P2=30−2Q2 MR2=30−4Q2 The monopolist's total cost is C=5+5(Q1+Q2). What are price, output, profits, marginal revenues, and deadweight loss if the monopolist can price discriminate? (round all answers to two decimal places) In market 1, the price is $12.50 and the quantity is 7.50 In market 2, the price is $17.50and the quantity is 6.25 The monopolist's profit is $_____.A monopolist is deciding how to allocate output between two geographically separated markets (East Coast and Midwest). Demand and marginal revenue for the two markets are: P1=20−Q1 MR1=20−2Q1 P2=30−2Q2 MR2=30−4Q2 The monopolist's total cost is C=5+5(Q1+Q2). What are price, output, profits, marginal revenues, and deadweight loss if the monopolist can price discriminate? (round all answers to two decimal places) In market 1, the price is $_____ and the quantity is _____ In market 2, the price is $______and the quantity is______
- A monopolist has a constant marginal cost of 12. Consumers' inverse demand is P = 32 - 4Q. The monopolist runs a persuasive advertising campaign that costs 26 and increases consumer demand to P = 37 - 4Q. (a) What is the gain (or loss) in the firms profits caused by the advertising campaign? b) When consumers' pre-advertising preferences are used to calculate welfare, what is the welfare gain (or loss) caused by the advertising campaign? Answer 2 Question 1 (c) When consumers' post-advertising preferences are used to calculate welfare, what is the welfare gain (or loss) caused by the advertising campaign? Answer 3 Question 1With regard to market structure, answer the following: (a) A monopolist never produces in the inelastic portion of its demand curve. True or false? Why? (b) Draw a figure showing a monopolist producing at the lowest point on its long-run average cost curve. (c) What is third degree price discrimination? Why does a monopolist practice it? What are the conditions are necessary for the monopolist to be able to practice it? Give a real-world example of third degree price discrimination? (c) If the price elasticity of demand is -3 in market 1 and -2 in market 2 and the price in market 1 is $12, what price should a monopolist practicing third degree price discrimination set in market 2?Consider the graph below that represents the demand curve for a good, the marginal revenue of a potential monopolist, and the marginal cost before an innovation (MC1 = 1) and after a potential innovation of size y (MC2 = 1/y). In the initial period, all firms have the same marginal cost MC1. A single firm can choose to try to innovate. If it is successful, it becomes a monopolist in the second period with marginal cost MC2. 1 1/Y Demand Marginal revenue MC1 MC2 ୪
- 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 a demand curve given by P = 90 - 2Q and a total cost curve given by TC = 72 + Q2. The associated marginal cost curve is MC = 2Q, %3D and the associated marginal revenue curve is MR = 90 – 4Q. What is the profit-maximizing quantity and price. How much economic profit does the monopolist earn? Suppose this monopolist could engage in an advertising campaign that would increase demand to P = 108 – 2Q (and MR = 108 – 4Q). What would be the maximum amount this company would be willing to pay for this advertising campaign?In this problem, the inverse demand function is 100 – Q, and marginal cost is 90 – Q/2. A monopolist dominates this Internet industry. The government orders the firm to produce at the point where the price equals marginal cost. (a) Why might the government think that this level of output would increase economic efficiency? (b) Now calculate the output level at which price equals average cost, and calculate profit. Why might the monopolist prefer this output level to the one in which price equals marginal cost? (c) How can the government induce the monopoly to produce, for years to come, at the point where price equals marginal cost?
- You are the only seller of Melba sauce in the Albany region. The local demand for jars of Melba sauce and your marginal costs of producing the sauce are as follows: Marginal benefit (demand): P = 50 - 0.5Q Marginal cost (supply): P = 2 + 2Q What quantity of jars of Melba sauce should you optimally produce as a monopolist?A monopolist faces the demand curve Q(P ) = 50 − P 2 . The firm can produce output with marginal costs MC(Q) = Q and no fixed costs. Hint for the following questions: if revenue is of the form R(Q) = (a − bQ)Q, then the derivative of revenue is a − 2bQ. (a) What is the profit maximizing price for the monopolist in this market? (b) What is the deadweight loss from monopoly in this market, compared to the efficient output that sets price equal to marginal cost? *Please fully explain out any mathA different industry has a Demand curve given by Q = 100 p − 1 2 Assume that a monopolist supplies this industry. The cost function of this monopolist is c(Q)=2*Q. What is the price the monopolist charges? What is the quantity the monopolist sells?
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