Consider a multi-product monopolist that produces two goods q1 = Q1 (P1, P2) Bonus question and q2 = Q2 (P1, P2) where the demand functions are defined as Q; (P1, P2) = a – i + dp; for i, j = 1,2 where ò > 0, d can be zero, positive or negative. Cost function takes the form C (q1, 92) = c (q1 + 92) – sq192 where c>0 and s > 0. %3! a. What sign does d need to have for goods to be substitutes? To be complements? Explain. b. Under what conditions are there economies of scope? Explain. c. Consider the case of linked demands d + 0 and unlinked costs s = 0. Assume c < 24 and 6² > d². Determine the optimal prices (pi, p5). Compare these prices with the ones that arise under the case of separate monopolists. Explain the intuition behind your results.

Consider a multi-product monopolist that produces two goods q1 = Q1 (P1, P2) Bonus question and q2 = Q2 (P1, P2) where the demand functions are defined as Q; (P1, P2) = a – i + dp; for i, j = 1,2 where ò > 0, d can be zero, positive or negative. Cost function takes the form C (q1, 92) = c (q1 + 92) – sq192 where c>0 and s > 0. %3! a. What sign does d need to have for goods to be substitutes? To be complements? Explain. b. Under what conditions are there economies of scope? Explain. c. Consider the case of linked demands d + 0 and unlinked costs s = 0. Assume c < 24 and 6² > d². Determine the optimal prices (pi, p5). Compare these prices with the ones that arise under the case of separate monopolists. Explain the intuition behind your results.

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

Suppose that the only movie theater in town has two types of customers, senior citizens and adults. The demand curve for senior citizens and adults are given by: Q₁ = 100 - P₁ Q2 = 120 - 0.5P₂ Where Q₁ denote the number of movie tickets purchased by senior citizens and Q2 denote the number of movie ticket purchased by adults. The cost function for the movie theater is given by: TC 2000 + 20 (Q₁ + Q₂) Suppose that the theater can charge two different prices and is going to apply the third-degree price discrimination as their pricing strategy: Demand curve for senior citizens C. Demand curve for adults Total Cost of Production a. List and explain all the conditions necessary for third-degree price discrimination! b. (i) What prices will the movie theater charge and how many tickets will be sold to each type of consumer: (ii) Explain graphically your answer in part b(i, Now suppose that MC is rising, show graphically the case where third-degree price discrimination may not be profitable…
Consider the market demand and supply for widgets: QP = 200-2P; QS = 3P – 180 (1) (a) If the market is perfectly competitive, find the equilibrium price and quantity, and find the consumer and producer surplus. (b) If the market has only one producer, whose cost function is TC 60Q+Q², find the equilibrium quantity and price, and find the consumer and producer surplus. (c) Based on (b), now suppose that the government imposes a $4 tax on per unit consumption. Find the new equilibrium price and quantity, the consumer and producer surplus, and the government revenue if the tax is imposed on the monopoly.
The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed: P = 1,265-9Q The cost analysis department has estimated the total cost function for the poster bed as TC = -15Q3 +5Q +24,000 Short-run profits are maximized when the level of output is The total profit at this price-output level is The point price elasticity of demand at the profit-maximizing level of output is The level of fixed costs the firm is experiencing on its bed production is What is the impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated? Price Charged Output Produced Profits Generated Increase No change Decrease O O and the price is $ O O
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 firm charges different prices, P1 and P2, for its domestic and industrial customers. The corresponding demand functions are P1 = 125 - 2Q1; and P2 = 310 - 3Q2. The total cost function is TC = 2000 + 30Q. Determine the value of Q, sum of Q1 and Q2, that maximizes profit with price discrimination. Note: Round to 1 decimal place (type the value with no additional text or explanation).
Note: Hand written solution is not accepted.
A regional airline is the only carrier on a local air route and must determine the number of flights it will provide per month, and the fare it will charge. The estimated cost – fuel, airport charges, pilots, etc. – per flight is $2,000, and each flight is expected to be full, with 100 passengers. Thus the marginal cost per passenger may be considered to be $20.The estimated demand curve is P = 117 - 0.005Q, where P is the fare in dollars and Q is the number of passengers per month. What is the monthly profit if the airline chooses the profit-maximizing fare and number of flights? (Do not include $ sign in your answer. Round any intermediate calculations to two decimal places and your final answer to the nearlest whole number.)
A firm produces two substitute goods . Their demand curves and total cost function are given below : P1 = 130 - 4Q1-Q 2 P2 = 160-2Q1-5Q2 TC = 2Q1 +2Q1Q2 + 4Q 2 ( a ) Determine the profit maximizing outputs of both goods . ( Restrict your answers to 2 decimal points ) ( b ) Find the price elasticity of demand . ( c ) Evaluate the second order " Hessian " required for profit to be maximized .
A monopolist faces a demand curve described by p(g) = 100-2g and has constant marginal costs of 16 and zero fixed costs. If this monopolist is able to practice perfect price discrimination, its total profits will be: (a) 1,092 O (b) 2,646 O (c) 882 O (d) 1,764
Note : do not copy from other source please. Answer should be unique
3) A firm produces two goods Q1 and Q2 with the following demand functions: P1 = 315 – 4Q1 P2 = 260 – 3Q2 2 2 and a joint total cost function TC = 2Q1 + 3Q 1 Q 2 + Q2 + 400 Find (a) the profit maximizing level of output for Q1 and Q2. (b) the market clearing prices P1 and P2 (c ) the maximum profit the firm could earn Also,(d) use the Hessian determinant to evaluate the second order condition and interpret your results
A monopolist produces a unique product in three different plants, each with its own marginal cost structure. The overall market demand for the product is governed by the demand function = 128 - 8* P,where is the total quantity demanded, and Pis the market price. To meet this demand, the monopolist must decide on the allocation of production quantities Q1, Q2 and Q3 across Plant 1, Plant 2, and Plant 3 respectively. The marginal costs (MC) for producing the good in each plant are as follows: MC₁ = 1, MC₂ = 1 + 2 and MC3Q3. How many units should the monopolist optimally produce in Plant 1 to contribute to the total market demand 62 units O unit 63 units