Refer to Table 18-2. Suppose there is only one internetradio provider in this market and it seeks to maximize itsprofit. The company willa. sell 2,000 subscriptions and charge a priceof $48 for each subscription.b. sell 3,000 subscriptions and charge a priceof $40 for each subscription.c. sell 5,000 subscriptions and charge a priceof $24 for each subscription.d. sell 4,000 subscriptions and charge a priceof $32 for each subscription. Table 18-2The information in the following table shows the total demand for internet radio subscriptions in a small urbanmarket. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (peryear) and that the marginal cost of providing an additional subscription is always $16.Quantity DemandedPrice(Internet radio subscriptions) (Dollars per subscription per year)05001,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,0006460565248444036322824201612840

Profit refers to the total income of the company after all the deductions of costs etc.Revenue is…

Refer to Table 18-2. Suppose there is only one internet radio provider in this market and it seeks to maximize its profit. The company will a. sell 2,000 subscriptions and charge a price of $48 for each subscription. b. sell 3,000 subscriptions and charge a price of $40 for each subscription. c. sell 5,000 subscriptions and charge a price of $24 for each subscription. d. sell 4,000 subscriptions and charge a price of $32 for each subscription.

Refer to Table 18-2. Suppose there is only one internet radio provider in this market and it seeks to maximize its profit. The company will a. sell 2,000 subscriptions and charge a price of $48 for each subscription. b. sell 3,000 subscriptions and charge a price of $40 for each subscription. c. sell 5,000 subscriptions and charge a price of $24 for each subscription. d. sell 4,000 subscriptions and charge a price of $32 for each subscription.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Your firm produces a computer software called "Model It", which is sold to other businesses. Its demand has been estimated to be: QM = 550- 4PM +1.5PS - 2.SI, where, QM denotes units sold of "Model It" software, PM denotes "Model It's" price, Ps denotes the price of a best-selling competitor, and I is the average income of its consumers. a. Currently, PM = $110, Ps= $152, and I = 60. What is the estimated quantity demanded (QM) for "Model It" software? b. What is the change in QM that results from a one unit ($1) change in the PM? C. Holding the values Ps= $152 and I = 60 equal, state the demand function for "Model It" in the format QM = ao + a₁PM and its demand curve (inverse demand function) PM = a - bQM. d. Assume that the price of the competitor's product (Ps) changes from $152 to $172 and that I is still $60, state the new demand function for "Model It" (the format should be QM = αo + α1PM) and its (inverse) demand curve (PM= a - bQM).
(a) Does a monopolistically competitive firm have an incentive to produce at the level of output that minimizes the average total cost at the long run equilibrium? Explain with a diagram. (b) Suppose CLP Holdings Limited is a natural monopolist with constant marginal cost. Draw a diagram to indicate the profit-maximizing level of output, the profit-maximizing price, and the size of the profit. If the government wants to increase the market efficiency through price regulation, would you suggest the government setting the price equal to the firm’s marginal cost or its average total cost? Explain in detail with the diagram in part (i).
Which of the following describes a monopolized market structure? a. a few firms with some control over price producing similar products that are close substitutes b. a few firms with no control over price producing highly differentiated products c. many firms with no control over price producing identical products with no differentiation d. a single firm producing a highly differentiated product and serving the entire market e. a market structure with a single buyer
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1. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 - 2p Qy = 60 - 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker’s neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker’s neighbors. (a) Plot the private demand curve and private supply curve for both cigarettes on separate axes. (b) What is the privately efficient quantity demand of both cigarettes? (c) Add the public supply curves to the graphs you plot in (a). (d) What is the socially efficient quantity demand of both cigarettes?
3. Profit Maximization with Limited Information. Joe Holiday is a monopoly provider of Fishing Reels in a remote fishing village on a barrier island off the Gulf Coast. Currently he is selling is BassMaster reels for $50 each. Joe doesn't know the precise demand function for fishing reels, but he estimates price elasticity of demand to be -2. If the reels cost Joe $30 each, is he maximizing profits? If not, what would be the profit maximizing price? Is $50 a profit maximizing price? Y/N (circle one) Profit Maximizing Price
3. A monopolistically competitive firm sells boots and has the following in the short run: Demand: P = 80 – 0.5Q %3D MR: MR = 80 – Q TC = 1.5Q? + 40 1.5Q + (40/Q) TC: АТC: MC: MC = 3Q %3D Find the firm's profit maximizing quantity and price. Find the firm's profit or loss. Show some work here: Quantity = Price = Profit or Loss = (circle one, and write the number)
2. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…
4. Suppose a manufacturer and its retailer face the problem of double marginalization described in my notes, Section 11.1. If the manufacturer sets the wholesale price equal to its marginal cost c and in addition, requires the retailer to pay a fraction a (between 0 and 1) of its profit. Write down the retailer's profit maximization problem. Will this practice solve the double marginalization problem? (That is, will this 4.a practice maximize their joint profit?) 4.k Suppose the retailer is required to pay a fraction of a of its sales (i.e., total revenue). Write down the retailer's profit maximization problem. Will this practice solve the double marginalization problem?
Suppose 2 gas stations must post their prices for regular gasoline at 6am each morning and cannot change their price during the day. Each gas station has a choice: charge a relatively “low” price or charge a relatively “high” price. The following shows their profit for the day of each gas station depending upon which price each gas station chooses: Gas Station B Low Price High Price Gas Station A Low Price $2000, $900 $500, $1500 High Price $1200, $1800 $300, $2100 Assume that this is a "one shot" game: 4. Does this game represent a prisoner’s dilemma situation? Why or why not? 5. If the gas stations can talk the night before making their pricing decision and discuss their pricing strategies, what pricing strategy would each gas station choose the next morning? Assuming both gas stations act rationally, what will be the outcome of the game? Explain.
If a firm is practicing third−degree price discrimination and is charging a price of $8 per unit to consumers in Group A and a price of $10 to consumers in Group B, which of the following is true? A. Group A consumers have a lower price elasticity than Group B consumers. B. Group B consumers have a greater price elasticity than Group A consumers. C. Group A consumers have a greater price elasticity than Group B consumers. D. Group A consumers are less responsive to price changes than Group B consumers.
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