Suppose DOJ wants to test if products A and B are sufficiently broad to constitute a relevant product market, using the Hypothetical Monopolist Test. Assume that PA = PB = 60, mc₁ = mcß = 20, and 9A = 9B = 1000. For every $1 increase in the price of product A, A loses 20 units of sales to B, and loses 30 units of sales to products outside the candidate market.
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- A telephone company has isolated three distinct demands for its services:Weekdays: Q1=90-0.5P1Holidays: Q2=35-0.25P2Nights: Q3=30-0.2P3TC=25+20Q WHERE Q=Q1+Q2+Q3Show that as a discriminatory monopolist this company will maximize profits by charging the highest price in the market where the price elasticity of demand is lowest, by finding a) the profit maximizing level of outputb)the profit maximizing price and c) the price elasticity of demand in each marketUse Cramer's rule for solving simultaneous equations and the Hessian for the second order conditionsQ24 Monopolists, like firms in other market structures, strive to maximize profit. Microsoft when it first came out with its Windows operating system was thought to be a monopolist. Assume that Microsoft is a monopolist producing an output such that ATC = $11, P = $9, MC = $5, MR = $6, and AVC = $4.50. Microsoft is realizing Multiple Choice an economic loss that could be reduced by producing more output. economies of scale. an economic profit that could be increased by producing less output. an economic loss that could be reduced by producing less output.The USPS charged $0.50 per stamp in 2021 and allows stamps.com to sell a sheet of twenty $0.50 stamps with personalized photos for $1.20 per stamp. Stamps.com keeps the extra beyond the $0.50 it pays the USPS. If stamps.com is acting as a profit-maximizing monopolist, what is their Lerner Index, and what is the price elasticity of demand for a customized stamp?
- A monopolist sells a single good in two periods. There are two conumers who want to buy one unit of the good in each period. The willingnessto pay of consumer A is 2, while the willingness to pay of consumer B is 1.5. a) Would the monoplist want to set a price of 2 in the first period, if he can identify the consumer who bought the product in the next period. That is if he can track who has bought in the first period. Assume for the moment that consumer A buys in the first period at a price of 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.The table shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table. Assume that output can only be sold in integer amounts (i.e., 1 unit, 2 units, etc.). Once you have filled in marginal revenue, identify the quantity produced by the monopolist in this market. Quantity Marginal Revenue MR₁: MR3: MR5: 1 2 3 4 5 6 Price $13 $12 $11 $10 $9 $8 Marginal Cost $6 $7 $8 $9 $10 $11 How many units does the monopolist produce? MR₁ MR2 MR3 MR4 MR5 MR6 MR₂: MR4: MR6: Quantity:
- Figure: Price Discriminating Monopolist Market A P $20 16 14 6 Q₁ Q₂ $12 10 9 -AC = MC 6 Market B AC = MC MR MR Refer to the figure. In order to profit maximize, the monopolist should: Charge a price of $16 in Market A, and $10 in Market B. Charge a uniform price of $6 in both markets. Charge a price of $14 in Market A, and $9 in Market B. O Charge a price of $16 in Market A, and $6 in Market B.Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to clean the eyepiece. Jimmy believes he has the following demand for his service: Price of a Peep $1.20 Quantity of peeps demanded 1.00 90 100 150 200 250 300 70 60 50 350 40 30 400 450 20 10 500 550 a) For each price, calculate the total revenue from selling peeps and themarginal revenue per peep. Price Quantity TR MR $1.20 100 90 100 150 200 70 250 60 300 350 50 40 30 400 450 20 500 10 550 b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be? c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, though, if he…In Fruitland, strawberries are sold in 4-litre baskets to customers on a "pick-your-own" basis. There are 2 farmers who sell strawberries: Mickey and Kit. There are no costs of supplying strawberries for sale for either farmer, so each has MC = ATC = 0. Profit therefore is simply TR. Market demand for strawberries is given in the accompanying table. If the market were served by a monopolist, the quantity traded would be 125 baskets, the price per 4-litre basket would be $7.50, and the profit for the firm would be $937.50. If Mickey and Kit decided to collude, each would have an individual quantity supplied of 62.5 baskets and each would have profits of $468.75. Suppose Mickey and Kit agree to split the monopoly outcome. Kit, acting in her own self-interest, realizes that she can cheat and supply 87.5 baskets; when she does, Kit's profits are $525.00 and Mickey's profits are $375.00. Mickey decides to retaliate and increases his supply to 87.5 baskets too; when he does, Kit's profits…
- 27 $50 $45 $40 i of $35 $30 $25 ATC, Demand = P $20 $15 FLRATC = LRMC $10 MR $5 $0 20 40 60 80 100 120 Output (Q) The diagram above shows the Demand, MR, and cost curves for a monopolist in both the short-run and long-run. According to the information on the graph, the monopolist will maximize profit in the SHORT-run by choosing Output (Q) level and in the LONG- run by choosing Output (Q) level Select one: а. 25; 40 b. 40; 25 С. 25;B 80 d. 40; 80Q23 Monopolists, like firms in other market structures, strive to maximize profit. Microsoft when it first came out with its Windows operating system was thought to be a monopolist. Assume that Microsoft is a monopolist producing an output such that ATC = $6, P = $8, MC = $4, MR = $5, and AVC = $3.50. Microsoft is realizing Multiple Choice an economic profit that could be increased by producing less output. an economic profit that could be increased by producing more output. diminishing returns. an economic loss that could be reduced by producing more output. an economic loss that could be reduced by producing less output.A monopoly producer of drugs has a constant marginal cost of MC=8 and sells its product in two separated markets. The demand functions for the two separated markets are:• Market 1: P1=24-Q1 and • Market 2: P2=12-0.5Q2 i. Determine the firm’s profit-maximizing quantity and price in each market. Calculate the size of deadweight loss in each market and the total welfare loss caused by the monopoly. Illustrate the two separated market equilibria including the sizes of welfare loss with two monopoly market diagrams. ii. Calculate the size of monopoly profit or loss for each market. Based on the information provided, analyse the most critical reason that causes the monopoly to set prices differently in these two markets. iii. A new law was enacted that prohibits the monopoly from charging different prices in separated markets. With this new single-price law the monopoly is restricted to set only one single price no matter how many separated markets in which it monopolies. The board of…
