Consider a price discriminating monopolist facing two markets for its good. The demand equations faced by the monopolist and its cost function are: Market 1: Q1 = 55– PI Market 2: Q2 = 70 – 2P2 Cost Function: TC(Q) = 100 + 5Q, where Q = Q1 +Q2. a. If the monopolist can maintain the separation between the two markets, calculate the optimal output level that the firm should produce for each market to maximize profits. b. Determine the prices the monopoly should charge in each market, and calculate the profit of the monopoly. c. Construct a graph to represent your findings in item #3.a and #3.b.

Consider a price discriminating monopolist facing two markets for its good. The demand equations faced by the monopolist and its cost function are: Market 1: Q1 = 55– PI Market 2: Q2 = 70 – 2P2 Cost Function: TC(Q) = 100 + 5Q, where Q = Q1 +Q2. a. If the monopolist can maintain the separation between the two markets, calculate the optimal output level that the firm should produce for each market to maximize profits. b. Determine the prices the monopoly should charge in each market, and calculate the profit of the monopoly. c. Construct a graph to represent your findings in item #3.a and #3.b.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

See similar textbooks

Similar questions

A monopolist has a cost function c(q) = 5q+800 and faces aggregate demand q=3000 - 120p. Suppose first that monopolist sells q=400 units. The monopolist's revenue would be The monopolist profit would be The absolute value of the price elasticity of demand would be The consumer surplus would be Now suppose that the monopolist chooses q to maximize its profit. The monopolist's revenue would be The monopolist profit would be The absolute value of the price elasticity of demand would be The consumer surplus would be
Write out the monopolist’s profit function as a function of ?1 ??? ?2.
Consider the case of a monopolist who has the ability to perfectly price discriminate by charging each one of its customers a two-part tariff. Suppose for simplicity that there are only two consumers, Mary and Terry. Mary demand for the good is 2/3 of the aggregate demand. The aggregate demand is given by Q=550-3p, where Q denotes the total quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 5 Q + 100 Find the two-part tariff that the firm will charge Mary in order to maximize its profit. Then enter the fee of this two-part tariff below. (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)
Suppose a monopolist faces two markets withdemand curves given by D1(p1) = 200 − p1D2(p2) = 100 − 2p2Assume that the monopolist’s cost function is c(y) = y2 1. What is the optimal prices for the monopolist if it can charge different prices in these markets?2. What is the optimal price if the monopolist must charge the same price in each market?3. How much total consumers’ surplus changes between the two separate prices and the sameprice cases?
Suppose that a monopolist producing bicycles can divide the aggregate demand into two groups: The domestic market and the foreign market. The demand curve for the monopolist’s product in the domestic market is y1=1200-10p1 and the demand curve for the monopolist’s product in the foreign market is y2=800-10p2. The monopolist’s total cost function is given by C(y)= 50y where y=y1+y2. a)Assume that the monopolist does not practice price discrimination. Calculate his/her profit-maximizing price-quantity combination and the maximum profit. b) Assume that the monopolist practices third-degree price discrimination. Calculate his/her profit-maximizing price-quantity combination and the maximum profit in each market.
Consider a monopolist local movie theater which has two distinct client groups, adults and seniors. The inverse demands for the two group are given by:p(qA) = a − b · qAp(qB) = a/3-b/3.qB(a) Describe the demand function in the two markets graphically and then compute the demand elasticity in each market.(b) Compute the demand function qP under the assumption that the movie theather canonly offer a single price to both segments of the market. (Hint: at a given price addthe demand of the adults and senior market. You need to go from the inverse demand function to the demand function.) Illustrate the aggregate demand function in contrast to the demand functions in each segment. Now compute the optimal price of the movie theater when it can only offer a single and common price to the market segments. Who goes to the movies and who does not?(c) Next allow the movie theater to offer different prices in each segment and customerscannot mispresent their identity. What is the optimal price in…
A monopolist faces a market demand curve given by: Q= 70−p. a) If the monopolist can produce at constant average and marginal costs of: AC = MC = 6. what output level will the monopolist choose to maximize profits? What is the price at this output level? What are the monopolist’s profits? b)Assume instead that the monopolist has a cost structure where total costs are described by: C(Q) = 0.25Q^2 - 5Q + 300.With the monopolist facing the same market demand and marginal revenue, what price- quantity combination will be chosen now? What will profits be? c)Assume instead that the monopolist has a cost structure where total costs are described by: C(Q) = 0.0133Q^3 -5Q + 250.With the monopolist facing the same market demand and marginal revenue, what price-quantity combination will be chosen now? What will profits be? d) Graph the market demand curve, the MR curve, and the three marginal cost curves from (a), (b), and (c).
Consider the case of a monopolist who charges the same price to all consumers. The demand for the good is given by Q=813-7p, where Q denotes the quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 7 Q What is the profit maximizing price for this monopolist? (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)
Suppose a monopolist faces two markets with demand curves given by D1(p1) = 200 -p1 D2(p2) = 100 -2p2 Assume that the monopolist’s cost function is c(y) = y^2 1. What is the optimal prices for the monopolist if it can charge different prices in these markets? 2. What is the optimal price if the monopolist must charge the same price in each market? 3. How much total consumers’ surplus changes between the two separate prices and the same price cases?
Suppose a monopolist faces two markets with demand curves given by D1(p1) = 200 -p1 D2(p2) = 100 -2p2 Assume that the monopolist’s cost function is c(y) = y^2 1. What is the optimal prices for the monopolist if it can charge different prices in these markets? 2. What is the optimal price if the monopolist must charge the same price in each market? 3. How much total consumers’ surplus changes between the two separate prices and the same price cases? This is my fourth submission. no part of any previous solution was remotely right. I need this answered quickly. Yall have spent several days getting this wrong.
Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, quantity would fall by a ▼. Therefore, a monopolist will Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal- revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR). Price 10 9 CO 7 6 S E 2 0 -2 Demand Search percentage than the rise in price, causing profit to produce a quantity at which the demand curve is elastic. Marginal Revenue 86 Inelastic Demand e + Max TR C ? (CC Speaker/Headph A
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 1