Suppose that a monopolistic seller of flux capacitors faces the inverse demand curve P = 40 - 0.5Q, and that the monopolist can produce flux capacitors at a constant marginal cost of $5. Suppose that the government imposes a price ceiling of $6. How many units will a profit- maximizing monopolist sell when the price ceiling is in place?
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- Q1) Suppose that the inverse demand for a product is represented by the equation P = 50 – Q, where P is the price in Euros and Q is the annual output. Suppose that only one firm produces this product and that the marginal and average cost is €10. Calculate the profit-maximising price for this monopolist. Q2) In autumn, Erling Kagge, who lives alone on an island near the North Pole, puts 50 bags of root vegetables from his harvest into a cave just before a family of polar bears goes in to hibernate. The polar bears do not eat vegetables but would attack Kagge if he approached them. As a result, he is unable to get the vegetables out before the polar bears emerge the following spring. The vegetables spoil at the same rate no matter where he stores them. Which of the following statements best describes this behaviour? A. Kagge’s behaviour is an example of the anchoring effect in action B. Kagge’s behaviour is an example of the framing effect in action C. Kagge’s…A monopolist faces the demand curve illustrated below. Draw the marginal revenue (MR) curve on the graph. Suppose the marginal cost (MC) and average variable cost (AVC) both equal 6 for all quantity levels, MC = AVC = 6. Draw the MC curve in the graph. 512 11 10 10987 7 6 5 4 3 2 1 0 -1 -2 -3 15. Marginal revenue equals zero at what quantity level? a) Q = 0 b) Q = 6 c) Q = 9 d) Q = 12 e) Q = 18 U 16. At the quantity where Marginal Revenue equals zero a) Revenue is maximized b) The elasticity of demand is greater than one c) The elasticity of demand is less than one d) Marginal revenue equals average revenue b) 8 c) 9 d) 10 e) 11 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 17. Assume the fixed cost equals zero. The profit maximizing monopoly price equals a) 6 b) 12 c) 14 18. Again, assuming the fixed cost equals zero, the monopoly profit equals equals a) 10 d) 16 e) 189. A monopolist produces a good at a constant marginal cost of 4. Suppose the monopolist is able to practice first-degree price discrimination (FDPD). The (in- verse) market demand function for the good is given by P=10-bQ where P is price, Q is quantity and b> 0 is a constant. Let DL(Q) denote the deadweight loss at quantity Q, and let CS(Q) denote the consumer surplus at Q. (a) Under FDPD, the marginal revenue function of the monopolist is the same as the market demand function. Is this true or false? Explain carefully.
- © Macmillan Learning Monopoly: End of Chapter Problem 11. Sandy owns the only landscaping company in town that specializes in flower gardens-thus, Sandy is a monopolist. At a quantity of 10 flower gardens, the marginal cost of producing one more flower garden is $300, and the marginal revenue from selling one more flower garden is $250. To maximize profits, Sandy should decrease output to the point where MR = MC and increase price based on the demand curve. decrease output to the point where MR > MC and increase price based on the demand curve. decrease output to the point where MR = MC. The market price won't change because monopolists are price takers. O increase output to the point where MR = MC and decrease price based on the demand curve.9. A monopolist produces a good at a constant marginal cost of 4. Suppose the monopolist is able to practice first-degree price discrimination (FDPD). The (in- verse) market demand function for the good is given by P-10-bQ where P is price, Q is quantity and b>0 is a constant. Let DL(Q) denote the deadweight loss at quantity Q, and let CS(Q) denote the consumer surplus at (a) Under FDPD, the marginal revenue function of the monopolist is the same as the market demand function. Is this true or false? Explain carefully. (b) Let Q be the monopolist's optimal quantity under FDPD. Calculate the value of CS(Q) - DL(Q). (c) Suppose a regulator imposes a per-unit tax of t on the monopolist and re- distributes tax revenue to consumers, so that tax revenue becomes part of consumer surplus. Let Q; be the monopolist's optimal quantity under FDPD given a per-unit tax of t. Calculate the value of t that maximises CS(Q)-DL(Q).The figure at right shows the demand line, marginal revenue line, and cost curves for a single-price monopolist. Now suppose the monopolist is able to charge a different price on each different unit sold. The profit-maximizing quantity for the monopolist is whole number.) (Round your response to the nearest D Price ($) 1000- 900- 800- 700- 600- 500- 400- 300- 200- 100- 0- 0 MC ATC D MR 50 100 150 200 250 300 350 400 450 500 Quantity 17
- Q62 Assume that Mattel is a monopolist that sells 8 units of a toy per day at a unit price of $16. If it lowers the price to $15, its total revenue increases by $37. This implies that its sales quantity increases by Multiple Choice 1 unit per day. 12 units per day. 2 units per day. 3 units per day. 4 units per day.14.22. A monopolist has a cost function of c(y) = y so that its marginal costs are constant at $1 per unit. It faces the following demand curve: 0, D(p) = { 100/p if p 20; (a) What is the profit-maximizing choice of output? (b) If the government could set a price ceiling on this monopolist in order to force it to act as a competitor, what price should they set? (c) What output would the monopolist produce if forced to behave as a competitor?9 [32] A profit-maximizing monopolist is currently selling its product at a price which is 4 times its marginal cost. Accordingly, provided the firm is maximizing profit, the current price elasticity of demand is: A. elastic B. inelastic C. unit elastic [34] Suppose the market demand for caviar is given by Q = 40 - 2P, where Q is quantity demand and P is price. In which range below is the price elasticity of demand in the elastic category? A. 0 < P < 6 B. 30 < Q < 35 C. 12 < P < 15 D. Q > 25
- The following graph gives the demand (D) curve for 5G LTE services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local 5G LTE company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. PRICE (Dollars per gigabyte of data) 20 18 16 14 12 10 4 2 0 0 1 2 4 True MR 3 5 7 QUANTITY (Gigabytes of data) O False 6 8 ATC MC 9 10 D + Monopoly Outcome Which of the following statements are true about this natural monopoly? Check all that apply. ? The 5G LTE company must own a scarce resource. The 5G LTE company is experiencing diseconomies of scale. The 5G LTE company is experiencing economies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. True or False: Without government…The following graph gives the demand (D) curve for 5G LTE services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local 5G LTE company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. 20 18 16 1 20 1 PRICE (Dollars per gigabyte of data) 2 ATC MC- Monopoly Outcome MR D 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Gigabytes of data) Which of the following statements are true about this natural monopoly? Check all that apply. The 5G LTE company is experiencing diseconomies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. In order for a monopoly to exist in this case, the government must have intervened and created it. The 5G LTE company is experiencing economies of scale. True or…Profit maximization and loss minimization BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MCMC), marginal revenue (MRMR), average total cost (ATCATC), and demand (DD) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. (Graph 1) Suppose that BYOB charges $2.00 per can. Your friend Felix says that since BYOB is a monopoly with market power, it should charge a higher price of $2.25 per can because this will increase BYOB's profit.…