Part 1: Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 -0.04Q, where Q is the quantity demanded (in millions of packs) and Pis the price per pack (in $). Also, you should draw in the marginal revenue curve. Refer to the scenario above. If the quantity sold is 50 million packs, then the firm's total revenue is total cost is A. B. C. D. A. B. C $400 million; $200 million D $250 million; $100 million Part 2 Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. If Tobac Co. could successfully carry out perfect price discrimination, the social surplus would and the consumer surplus would be $200 million; $50 million $300 million; $150 million not be maximized; $112.5 million be maximized; $450 million not be maximized; $0 and the be maximized; $0
Part 1: Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 -0.04Q, where Q is the quantity demanded (in millions of packs) and Pis the price per pack (in $). Also, you should draw in the marginal revenue curve. Refer to the scenario above. If the quantity sold is 50 million packs, then the firm's total revenue is total cost is A. B. C. D. A. B. C $400 million; $200 million D $250 million; $100 million Part 2 Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. If Tobac Co. could successfully carry out perfect price discrimination, the social surplus would and the consumer surplus would be $200 million; $50 million $300 million; $150 million not be maximized; $112.5 million be maximized; $450 million not be maximized; $0 and the be maximized; $0
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Part 1:
Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the
official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack.
The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the
(inverse) demand curve is P = 8 -0.04Q, where Q is the quantity demanded (in millions of packs) and Pis the price per
pack (in $). Also, you should draw in the marginal revenue curve.
Refer to the scenario above. If the quantity sold is 50 million packs, then the firm's total revenue is
total cost is
A.
B.
C.
D.
A.
B.
с
$400 million; $200 million
D
$250 million; $100 million
Part 2
Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official
currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. If
Tobac Co. could successfully carry out perfect price discrimination, the social surplus would
and the consumer
surplus would be
$200 million; $50 million
$300 million; $150 million
not be maximized; $112.5 million
be maximized; $450 million
not be maximized; $0
and the
be maximized; $0
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education