Suppose that the Department of Justice (DOJ) vetoes all mergers that are likely to lead to an increase in price of the product. The market demand function is given by P(Q) = 50 – Q. Pre- merger, the market is competitive and the cost function is given by C(Q) = 30Q. Post-merger, the market will be controlled by a monopolist and C(Q) = xQ. For what values of r will the DOJ approve this merger?
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- A monopolist has a constant marginal cost of £2 per unit and no fixed costs. He faces two separate markets in the United States and in the UK. The goods sold in one market are never resold in the other. He sets one price P1 for the US market and another price P2 for the UK market (both measured in £). The demand in the United States is given by Q1=7,000-700P1 and the demand in the UK is given by Q2=1,200-200P2. Calculate the profit maximising output produced and price charged in each country by the price-discriminating monopolist and comment in which country the price charged is higher and by how much.The supply chain for Pappy Van Winkle bourbon is characterized by a monopolist upstream producer and a competitive downstream retail sector. Final consumers’ demand for Pappy Van Winkle bourbon is given as: P=140-2Q, where Q is the number of bottles that are purchased each day. The marginal cost of production (i.e., performing the manufacturing function) can be written as: MCM=30+2Q, and the marginal cost of performing the retail function is MCA=20. Suppose that the two firms are not vertically integrated. Construct the final consumers’ demand curve.A key difference between monopoly and perfect competition is options: the demand curve faced by a perfectly competitive firm is different than the industry demand curve, but the demand curve faced by the monopolist is the same as the industry demand curve. Perfectly competitive firms have considerably more market power compared to monopolists. Price equals marginal revenue for a monopolist, but not for a perfectly competitive firm. the demand curve faced by a monopolist is different than the industry demand curve, but the demand curve faced by a perfectly competitive firm is the same as the industry demand curve.
- A monopoly produces a good with a network externality at a constant marginal and average cost of c = $2. In the first period, its inverse demand curve is p 14-1Q. In the second period, its inverse demand curve is p=14-1Q unless it sells at least Q = 8 units in the first period. If it meets or exceeds this target, then the demand curve rotates out by a (it sells a times as many units for any given price), so that its inverse demand curve is p=14- - 1/10. The monopoly knows that it can sell no output after the second period. The monopoly's objective is to maximize the sum of its profits over the two periods. For what values of a would the monopoly earn a higher two-period profit by setting a lower price in the first period? . (round your answer to two decimal places) If a isSuppose a monopolist faces two groups of consumers. Group 1 has a demand given by P1=50−2Q1�1=50−2�1 and MR1=50−4Q1��1=50−4�1. Group 2 has a demand given by P2=40−Q2�2=40−�2 and MR2=40−2Q2��2=40−2�2. The monopolist faces a constant marginal cost equal to MC=10��=10.If the monopolist is allowed to engage in 3rd degree price discrimination, how many units of output will the monopolist sell? Question 12Answer a. 25 b. 10 c. 15 d. 20Suppose that a Monopolist is attempting to pioneer the market for a new good. This product is unique enough that there are no close substitutes, and there is no threat of entry. The monopolist anticipates facing the demand function P=80-Q. The monopolist has a fixed cost of 900 and a total variable cost of VC=10Q and marginal cost of MC=10. Suppose the firm considers setting a uniform price to maximize its profit. Will the firm be profitable? Now suppose that the realized demand is lower than the firm anticipated: P=60-Q. Is the firm profitable? Continue to assume that the demand curve is P=60-Q. Fans of the product worry that the firm might go under, and to help save it every consumer agrees to pay his willingness to pay for each unit of output. Is perfect first degree price discrimination enough to save the firm (is the firm profitable under first-degree price discrimination)? Continue to assume that the demand curve is P= 60-Q. Suppose the new good is a Golf Course (so units of…
- There are two firms in a market, where quantities are the strategic variable within two periods. In each of the two periods t = 1; 2 the inverse demand function Ptis given by P: (y') = 5-y'. The cost function of firm i is given by C=3+2y, where i=1,2. In the first period firm1 is a protected monopolist. Profits of a firm can be interpreted as the sum of its profits in each period. In order to maximize their profits, firms set quantities. Define the monopoly solution. (i) (ii) Firm1 must choose the same quantity in each period y = yf due to the technological restrictions. Considering ył firm2 thinking to enter in period 2. Define the profit maximizing yi if y is given. (iii) Suppose that firm 2 will enter in the second period. What quantity will firm 1 have? What is the equilibrium P, Q and profit?A monopolist firm sells good Q and demand is Q = 26 - P, where P is price. The firm's total cost is TC = 16 +5Q. If the firm decides to produce and sell Q = 11 units, then its resulting profit is $76 $82 $88 $94Economics A market comprises two consumers groups: high- demand types and low-demand types. Assume there are 100 consumers of each type. The high types have demand QH = 14 – Pand low types have demand QL = 12 – P. Assume the marginal (and average) cost is 4 and there are no fixed costs. If the monopolist firm is able to distinguish between the two consumer types and using block pricing to extract maximum profit, how much profit will they earn in total? Select one: а. 9000 b. 6800 С. 8200 d. 7200
- we had two buyer types for pharmaceuticals. One with inverse demand P = 8 – 0.25Q, and one with inverse demand P = 4 – 0.1Q. Marginal cost of the monopolist was constant and equal to 2. If the monopolist cannot price discriminate (so they charge a single price to everyone), show whether their profits are higher serving only the high demand market, or serving both markets. Show whether consumer surplus is higher or lower with or without price discrimination at the monopolist’s optimal solution in either case.Suppose a monopolist faces two types of consumers: one with demand curve Q1 = 500 – 2P, and the other with demand curve Q2 = 1500 – 3P. Suppose the firm monopolist knows these demand curves but cannot tell the difference between an individual consumer of type 1 versus type 2. They can charge only one price to the aggregate market demand (horizontal sum across quantities of the two buyer types). Construct the market demand curve (it may have a kink), and calculate the monopolist’s optimal quantity and price. Illustrate this on a graph. Do they serve both markets or do they price out the low demand type? Illustrate the monopolist’s optimal second-degree price discrimination strategy on a graph, and calculate the price-quantity bundles offered to the market under this strategy. Assume the monopolist’s marginal costs are constant and equal to 100. Suppose the monopolist can segment the market between the two types directly and engage in price discrimination. What are the monopolist’s…A monopoly can use one of two alternative technologies. One technology requires 10 units of capital and 11 units of labor for each unit of output. The other technology requires 20 units of capital and 2 units of labor for each unit of output. The price of capital, r, and labor, w are both $1 per time period. This means the cost function cor- responding to the first technology is C1(y) = 2ly and the cost function corresponding to the second technology is C2(y) = 22y. The demand function is given by: P(y) = 100 -y The unregulated monopolist will clearly use the first technology since it allows produc- tion of any output level y at a lower cost. %3D %3D (a) Calculate the monopoly's output, price, and profit if it uses the first technology Consider a rate of return regulation which allows the monopoly to take as profit only $0.1 per each $1 of capital. (b) What would be the output, price and profit under each technology?