Suppose you are employed at a monopolistic company as a research (pricing)economist and you are deriving the behavior of two markets based on demand curves given by: D1 (p1) = 50 - p1 D2 (p2) = 50 - 2p2 Assume that the marginal cost is constant at $8 a unit. (a) If it can price discriminate, what price should it charge in each market in order to maximize profits? (b) If it can't price discriminate, what price should it charge?

Suppose you are employed at a monopolistic company as a research (pricing)economist and you are deriving the behavior of two markets based on demand curves given by: D1 (p1) = 50 - p1 D2 (p2) = 50 - 2p2 Assume that the marginal cost is constant at $8 a unit. (a) If it can price discriminate, what price should it charge in each market in order to maximize profits? (b) If it can't price discriminate, what price should it charge?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter13: Between Competition And Monopoly

Section: Chapter Questions

Problem 5DQ

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7. Suppose you are employed at a monopolistic company as a research (pricing) economist and you are deriving the behavior of two markets based on demand curves given by: D1(P1) = 50 – P1 D2(P2) = 50 – 2p2 Assume that the marginal cost is constant at $8 a unit. (a) If it can price discriminate, what price should it charge in each market in order to maximize profits? (b) If it can't price discriminate, what price should it charge?
In small collegetowns, it is not uncommon that the rental market is dominated by one or a handful ofproperty management companies. Suppose demand for housing is given by MWTP(Qd)=2400-4QdSupply from the monopolistic landlord can be characterized by MC(Qs）=1500+Q°1. How many units will be rented in this collegetown? At what price?
If this graph represents the market for Sonoran hotdogs in Tucson , which statement is true? A The market is monopolistically competitive and at its long run equilibrium B The market is a monopoly and firms are earning positive profits C The market is an oligopoly and firms are earning positive profits D The market is perfectly competitive and firms are suffering losses E The market is monopolistically competitive and not at its long run equilibrium
Using the information from the previous question, assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct. 2.
Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete. If the number of firms entering the dolls market increase, we know that, 1. (a) The price of dolls will drop. (b) The average cost of UD will increase. (c) The quantity sold by UD will drop. (d) All the above answers are correct.
CYou are the manager of a monopolistically competitive firm. The present demand curve you face is P= 100 - 4Q [MR = 100-8Q]. Your cost function is C(Q)= 50+ 8.5Q [MC: 17Q]. (a) What level of output should you choose to maximize profits? (b) What price should you charge? (c) What will happen in your market in the long run? Explain. (d) Would you expect the demand for a monopolistically competitive firm's product to be more or less elastic than that for a monopolist's product? Explain.
11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. оп апy Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field…
Norah Jones’ (famous for the songs “Come Away With Me” and “Don’t Know Why”) last national concert tour sold an average of 2/3 of the tickets available, with 1/3 of seats left empty at a typical concert. (A.) Suppose the local promoter of each concert is a monopolist with a fixed number of seats in each concert hall. The promoter’s cost is independent of the number of people who attend the concert (Norah Jones received a flat payment independent of the number of tickets sold). If the concert charges a single market price, what factors would be considered in determining the profit maximizing price? (B.) Does the failure to sell out a concert suggest that the concert venue set too high a price? Does the failure to sell out a concert imply that there is deadweight loss? Explain. (C.) How (if at all) does the size of Norah Jones’ flat payment influence the profit maximizing price? Explain. (D.) How would your answers change if the concert hall is able to perfectly* price discriminate…
A monopolist faces a demand curve P = 64−2Q and MR = 64−4Q. His marginal cost is MC = 16. (a) Graph the three functions and compute the profit maximizing output and price. (b) Compute the efficient level of output (where MC=demand), and compute the DWL associated with producing the profit maximizing output rather than the efficient output. (c) Suppose the government gave the monopolist a subsidy of $4 per unit produced. The MC would be reduced accordingly to $12 from $16. Compute the profit maximizing output level and the deadweight loss associated with this new output. Explain intuitively why the DWL has changed.
When Home depot charges $93 for a children's game, they sell 100 units. When they charge $85, they sell 120 units. If they were to give away the game for free, how many units (Q) would be demanded?
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I understand how to compute the revenue but I'm stuck on computing the elasticity.