Suppose a textbook monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by Q₁ = 55 - P₁ and the curve in the second market is given by Q2 = 70-2P2- a) If the monopolist charge the same price, how many units should it sell? What price should it charge to maximize its profits? What are profits in this situation? (Answer: Q = 55 units) b) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what price will prevail in each market? What are total profits in this situation? (Answer: Q₁ = 25 units; Q₂ = 30 units)

Suppose a textbook monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by Q₁ = 55 - P₁ and the curve in the second market is given by Q2 = 70-2P2- a) If the monopolist charge the same price, how many units should it sell? What price should it charge to maximize its profits? What are profits in this situation? (Answer: Q = 55 units) b) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what price will prevail in each market? What are total profits in this situation? (Answer: Q₁ = 25 units; Q₂ = 30 units)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Consider a monopoly market in which the market demand curve is given by P = 240 – 2Q, the marginal…

A: Total surplus is the sum of consumer and producer surplus.With the perfect competitive we have more…

Q: A monopolist is selling a product with a linear demand curve that has a vertical intercept of p=10…

A: When there is just one vendor in the market, this situation is referred to as a monopoly. In…

Q: Refer to Diagram 2 above, which represents a monopolist firm, to answer the following questions.…

A: *Hello. Since your question has multiple sub-parts, we will solve the first three sub-parts for you.…

Q: Suppose that we are in a market dominated by a monopolist. Market demand is given by: Q=222-2p The…

A: A monopoly is a market condition in which there is a single seller selling services and goods in the…

Q: The following graph gives the demand (D) curve for 5G LTE services in the fictional town of…

A: Ans. ) Given the question, there is a local 5g LTE company, which is a natural monopoly. A natural…

Q: Consider the figure to the right. The quantity Q₁ is 2,200 units, the price P₁ is $4 per unit, and…

A: Monopoly refers to a market form in which only a single seller exists. This market structure…

Q: Why does the monopolist always produce only until that level of output where the own-price…

A: A monopolist tends to maximise its profit and produces the output up to that level at which MC = MR,…

Q: Suppose that an ordinary monopolist faces an inverse market demand curve P = 100 - Q. Suppose that…

A: A monopoly is a form of market that consists of a single seller and a large number of buyers. The…

Q: If a monopoly faces an inverse demand curve of p=330 - Q. has a constant marginal and average cost…

A: We are given the inverse demand function of the monopolist: P = 330 - Q Given the cost: MC…

Q: Suppose there is only one producer of popsicles in Icetown. The market demand for popsicles can be…

Q: Suppose there is a Monopolist that has a 2 cost function of C = 50 + Q and the ( inverse) market…

A: The Monopoly refers to market structure where only single firm exists in the market. There is no…

Q: Assume that a monopolist sells a product with a total cost function: TC= 1,200 +0.502. The market…

A: Monopolist: A monopolist is a single seller in the market and hence he faces the downward sloping…

Q: A monopolist produces output with the following (inverse) demand function: P=120-Q where P is the…

A: P =120-QMC=60TC=60QNow,TR= P x Q =(120-Q) x Q…

Q: Consider the figure to the right. The quantity Q₁ is 2,400 units, the price P₁ is $6 per unit, and…

A: Monopoly refers to that market form in which there exists only a single seller and this market…

Q: Suppose the market for kiwis has a demand curve of the form: Qd = 200-2Pd And that the costs of the…

A: Answer;

Q: If a monopoly firm can sell 12 items per day at a price of $150 each, and to increase sales by one…

A: Total revenue is the product of price of each product and the number of unit sold.

Q: Suppose a monopolist's inverse demand curve is given by p(y) = 100 - 2y where p is price and y is…

A: Marginal Cost measures the change in total cost resulting from producing one more unit, while…

Q: All consumers are alike and each has an demand curve for a monopolist’s product of P=100- 2Qd. The…

A: The monopoly firm produces where the MR =MC but monopoly firm can increase its profits by following…

Q: A monopolist originally charges one price when producing output for consumers with a market demand…

A: A monopoly is a market structure where a single firm dominates the market. The market price is…

Q: Assume that a monopolist sells a product with a total cost function: TC = 1,200 +0.50². The market…

A: Monopoly: Monopoly refers to such a market situation where a sole seller faces the entire market…

Q: Consider a monopolist facing two consumers with the following two inverse demand functions:…

A: If the monopolist decides not to serve the low demand consumer, the inverse demand function for the…

Q: The figure at right shows the demand line, marginal revenue line, and cost curves for a single-price…

A: Profit-Maximizing Quantity:Identify the intersection point of the marginal revenue (MR) curve and…

Q: Consider a monopolist facing two consumers with the following two inverse demand functions:…

A: Two-part pricing is a pricing strategy often used by businesses to maximize their profits,…

Q: Consider the case of a monopolist who charges the same price to all consumers. The demand for the…

A: In a monopoly market structure, There exists a single seller. The firm produces where the marginal…

Q: A monopolist faces a market demand curve given by: Q = 80 - p. Assume that the monopolist has a cost…

A: A monopolist market is a market structure characterized by the presence of a single firm that…

Q: onopolist if it can charge different prices in these markets? 2. What is the optimal price if the…

Q: Graphically show a monopoly firm that currently sells 250 units of output at a price of $60/unit,…

A: Given A monopoly sells 250 units at price $60 per unit. At the 250th unit, MR=40, MC=50, ATC=60 We…

Q: Suppose a monopolist is characterized as follows: P= 1200-5Q C = 8600 +28Q+Q² MC = 28 +2Q demand…

A: The monopoly refers to the market condition where a single firm exists in the market. A firm is…

Q: A monopolist has a single customer with the demand curve P=20-Q. (So this customer will buy…

A: Demand function : P = 20 - Q MC for both the firms = 0 A monopolist maximizes his profits at the…

Q: The graph above shows the cost and revenue curves for a natural monopoly that provides electrical…

A: Given Graph shows the cost and revenue curves for a natural monopoly that provides electrical power…

Q: Consider the electricity industry, in which there are very large fixed costs but also in which…

A: The monopoly is a market structure which has a single seller and many buyers in the market. The…

Concept explainers

Perfect Competition

It is the structure of the market that is said to exist when with many buyers and sellers exchanging similar commodities and its price is fixed by the market forces, demand, and supply, and a single firm cannot cause an impact over the price or market value of the homogenous product. This structure of the market is called perfect competition.

Question

4. Suppose a textbook monopoly can produce any level of output it wishes at a constant
marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in
two different markets that are separated by some distance. The demand curve in the first
market is given by Q₁ = 55 - P₁ and the curve in the second market is given by
Q2 = 70 - 2P₂.
a) If the monopolist charge the same price, how many units should it sell? What price
should it charge to maximize its profits? What are profits in this situation? (Answer:
Q = 55 units)
b) If the monopolist can maintain the separation between the two markets, what level of
output should be produced in each market and what price will prevail in each market?
What are total profits in this situation? (Answer: Q₁ = 25 units; Q₂ = 30 units)

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!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Part a:

VIEW

Step 3: Part b:

VIEW

Step 4: Determine Price and quantity for market 2:

VIEW

Step 5: Determine the total profit:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 6 steps

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

Consider a discriminating monopolist that sells a product in two isolated geographical areas. The monopolist faces the following demand functions P1 = 100 - Q1 and P2 = 80 - Q2 and the cost function is C = 6(Q1 + Q2) The authorities in market 1 impose a tax of t per unit sold in market 1. How much tax revenue do the authorities in market 1 get?
Jackelina's company is a monopoly that faces demand Qd = a - bp, where a and b are positive numbers. The monopolist's marginal revenue function is: MR = a-2bP MR = a/Q - b = MR a/b - 2Q/b MR = a -2bQ
If a monopoly firm can sell 12 items per day at a price of $150 each, and to increase sales by one (marginal) item per day, the monopolist must lower price to $148, calculate the marginal revenue of the 13th item:
2
There is a monopolist,ConcreteMex,in the concretemarketin Mexico. The demand function is QD= 100–50p. The marginal cost of production isc=0.4. (referencing) Question 1.3 ConcreteMex claimed the high price is due to high transportation costs and persuaded the government to help cut down the costs. As a result, for every unit of concrete sold, the government subsidizes ConcreteMex 0.2dollars. What are the new profit-maximizing price and production levels for ConcreteMex? Under the subsidy policy and the new price in Question 1.3, calculate the consumer surplus, producer surplus, and deadweight loss. You do not need to consider government spending for the deadweight loss.
Consider a monopolist operating on a market with a downward sloping demand curve. The monopolist has a constant marginal cost and no fixed cost. At the current level of production and at the current price level, the price elasticity of demand is equal to -0.8. Assume the monopolist wishes to maximise profits. Would we be able to say anything about whether the monopolist has chosen a price and quantity that maximise profits? Explain your answer by means of diagrams (maximum 150 words) 2. What is the price elasticity of supply in this market?
A monopolist is able to price discriminate in two market segments. The inverse demand curve in segment 1 is P1 = 400 - Q1 and the inverse demand curve in segment 2 is P2 = 300 - Q2. The firm's total cost function is TC = Q^2. How many units will the monopolist sell and at what price in segment 1 and segment 2?
Suppose a monopolist faces a market demand that is the first two columns in the table below. Also, in the short run, assume that Total Fixed Cost equals $100 and the monopolist has Total Variable Cost according to the table. Find Total Revenue for each price and quantity combination, and then Marginal Revenue as price falls and quantity increases. Fill in the rest of the costs in the table and find profit at each price and quantity combination as the difference between Total Revenue and Total Cost. If profit is less than zero that indicates a loss. What is the maximum profit you found in this table? At what quantity and price combination is profit maximized for this monopolist? Next, verify this result by using Marginal Analysis to find the profit maximizing price and quantity combination. For each quantity, ask yourself if Marginal Revenue exceeds Marginal Cost. If it does, then profits would be increased by producing that quantity. As you go down the table to higher quantities, stop…
If a monopolist faces a demand p(q) = 130-3q and costs c(q) = 2q^2, answer: a) What is the quantity this monopolist would sell? b) What is the price they would charge?
Suppose the market demand function (expressed in dollars) for a normal product is P= 90-q, and the marginal cost (in dollars) of producing it is MC = 1q, where P is the price of the product and q is the quantity demanded and/or supplied 1. Compute the consumer surplus and the producer surplus assuming this same product was supplied by a monopolist. Note that the monopolist’s marginal revenue curve has twice the slope of the demand curve. 2. Compare and contrast economic surpluses under monopoly market vs competitive market. 3.
The demand for good X is given by x = 586 p-6. The good is sold by a monopolist with cost function C(x ) = 4 x and whose is aim is to maximize profit. The firm charges all customers the same price. If the government imposes a per unit tax equal to 4 dollars on the firm, what price will the monopolist charge consumers?
Consider a monopolist facing a market demand given by: P = 200 - 4Q. Where P is the price and Q is the quantity. The monopolist produces the good according to the cost function c(Q) = Q2 + 5. Determine the profit maximizing quantity and price the monopolist will offer in the market. Calculate the profits for the monopolist. Calculate the deadweight loss due to a monopoly. Illustrate this in a well labelled diagram. I will thumbs up solution if it is original answer and not from ChatGPT, if ChatGPT is used I will thumbs-down and report to Chegg as ChatGPT returns the incorrect answer here and I'm stuck. Thank you! :)