Suppose that a firm is an imperfect competitor in the product market and a perfect competitor in the input markets and uses two variable inputs: Derive mathematically the first order condition showing how much of each input the firm should use se to maximize total profits Give a graphical interpretation

Suppose that a firm is an imperfect competitor in the product market and a perfect competitor in the input markets and uses two variable inputs: Derive mathematically the first order condition showing how much of each input the firm should use se to maximize total profits Give a graphical interpretation

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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Assume that we are in a monopoly and demand curve is given by following expression:p(q) = 45 - q2And further it is known that marginal cost (MC) is given by:MC(q) = 6 + (q2/4)Under assumption that utility is maximized, answer:(a) Calculate marginal revenue (MR) and equilibrium point of monopoly. Graphb) Calculate consumer surplus (CS). Show it on the graphNOTE: remember that functions ARE NOT LINEAR. Consumer surplus is calculated as (see attached image)
Your firm has a monopoly over of two products, Good 1 and Good 2. Both products are produced at a constant marginal cost of $25. You face four consumers (or groups of consumers) with the following reservation prices: (Image)Suppose that you have three alternative pricing strategies: i) individual pricing, ii) pure bundling, and iii) mixed bundling. For each strategy, determine the optimal prices to be charged, which consumer buys which product and the resulting profit. Which pricing strategy would yield the largest profit? Consumer B C D Good 1 (S/unit) 15 40 70 85 Good 2 (S/unit) 90 45 30 20
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1. It is 1908 and you are the CEO of Ford Motor Company. General Motors startedproducing cars this year and has quickly become your chief rival. Their recent entrance, as wellas your assembly line methods, allows you the advantage of producing cars faster and choosingyour output levels first. Assume the 1908 inverse demand function for cars is P = 3900 - Q(customers view cars as identical products at this point in time) and production costs are C(qi) =100qi. a. What is Ford’s profit-maximizing output level? GM's?b. What is the market equilibrium price?c. How much profit does each firm earn?d. As the assembly line is used by other firms, the first-mover advantage disappears (fast forward100 years to present day), and more firms have entered the market (e.g. FCA, Tesla, Hyundai,Toyota, Honda, etc.), what do you expect to happen to Ford’s profit (assume demand andcosts are the same)? Explain.e. From 1908 into the 1920s, Ford offered customers one car: the Model T. Further, Henry isfamous…
Suppose you are managing a farming company, which is one of the major producers of Tomato in the State of North Carolina. You have been provided with the following graph which shows the demand curve for the tomatoes that your company is producing. As you can see, there are two known points (X and Y) on a demand curve for tomatoes. According to the “standard" method of computing elasticity (i.e. use the standard formula of percentage change in your computations), the standard-method price elasticity of demand for tomatoes when moving from point X to point Y is approximately Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of pounds of tomatoes)
The following graph shows the daily market for small cardboard boxes in San Diego. PRICE (Dollars per small box 10 9 Demand 0 161 6 QUANTITY (Millions of small boxes) 2 Supply 19 10 Suppose that Talero is one of more than a hundred competitive firms in San Diego that produce such cardboard boxes. Based on the preceding graph showing the daily market demand and supply curves, the price Talero must take as given is
Prior to 1995, Taiwan had only one beer producer, a government-owned monopoly called Taiwan Beer. Suppose that while it was a monopoly, the company was run in a way to maximize profit for the government. That is, assume that it behaved like a private, profit-maximizing monopolist. Assuming demand and cost conditions are given on the following diagram, at what level would Taiwan Beer have targeted output and what price would it have charged? Now suppose that while it was a monopoly, Taiwan Beer decided to compete in the highly competitive American market. Assume further that Taiwan maintained import barriers so that American producers could not sell in Taiwan but that they were not immediately reciprocated. Assuming Taiwan Beer could sell all that it could produce in the American market at a price P = Pu.s., indicate the following: Total output is given by Initial output sold in Taiwan is given by The new price in Taiwan after the U.S. market opens is The output sold in the U.S. is…
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Allocative inefficiency is observed in the case of monopoly where economies of scale is absent. Define the allocative inefficiency and present a diagram which shows allocative inefficiency of profit-maximizing monopoly. Compare the price and profit maximization level of output of monopoly to those of a perfectly competitive market. For comparison’s sake, use the assumption that firms in a perfectly competitive industry were bought by a business person and begins to act as a monopoly.
Back to Assignment Attempte 2. The market for EpiPens Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylart, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is essumed to be constant, and the average total cost (ATC) of Mylen. The graph also shows JAMOD JANUALUL SEU UuU aun 324D (gw) ann an AM, PUIŠJEW) Din pue suadida (0) (0) ANDA SUPwar 241 On the graph, use the grer point (star symbol) to indicate the quantity of EpiPere demanded in Mylan continues to charge $150. Deshed drop lines will sudomsically extend to both, exes. e fat par JECH 342 AN Keep the Highest/3 COP…
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(a) Consider a monopoly trading firm that dominates a particular market. Describe the factors that contribute to the monopoly's ability to control prices and generate profits and as such discuss its short run and long run profit situation. Use relevant diagrams to support your answer.(b) Suppose more firms are interested in joining the market and over the years, the market structure is characterised by monopolistic competition. Discuss the implication on the firm's short-run and long run profits. Use relevant diagrams to support your answer.