The marginal cost of producing ice cream cones is $1.00. Suppose the Ice Cream Monopoly Company sells to Juan using a two-part tariff with a per-cone price of $1.00. Instructions: Round your answers to 2 decimal places as needed. a. What is the largest fixed fee it can charge Juan and still persuade Juan to make a purchase? $ b. How does its total revenue from Juan under this two-part tariff compare to its total revenue from Juan when it sells Juan 6 ice cream cones, each priced at Juan's willingness to pay for it (on a cone-per-cone basis)? Under this two-part tariff, what is its total profit from Juan? TR = $ Profit = $

The marginal cost of producing ice cream cones is $1.00. Suppose the Ice Cream Monopoly Company sells to Juan using a two-part tariff with a per-cone price of $1.00. Instructions: Round your answers to 2 decimal places as needed. a. What is the largest fixed fee it can charge Juan and still persuade Juan to make a purchase? $ b. How does its total revenue from Juan under this two-part tariff compare to its total revenue from Juan when it sells Juan 6 ice cream cones, each priced at Juan's willingness to pay for it (on a cone-per-cone basis)? Under this two-part tariff, what is its total profit from Juan? TR = $ Profit = $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Barbara is a producer in a monopoly industry. Her demand curve and total cost curve are given by Q = 160 - 4P and TC = 4Q. Barbara will produce ✓ units. Barbara will charge a price of Barbara will make a profit of Suppose now the government imposes a tax of 4 dollars on each unit sold. With the tax: Barbara will produce ✓ units. Barbara will receive a price per unit of higher). Barbara will make a profit of In addition to the tax, suppose the government imposes a business levy (a fixed cost) of $500. With this levy: Barbara will produce Barbara will charge a price of Barbara will make a profit of ✓. Note: we're looking for the Barbara receives, not the price consumers pay (which will be ✓ units. ✓. Note: we're looking for the Barbara receives, not the price consumers pay (which will be higher).
The following table gives total revenue and cost for a monopolist: Quantity Price Total Revenue Total Cost 100 1 185 150 130 180 290 170 175 415 222 4 170 520 287 165 600 367 160 655 467 155 685 587 150 685 737 If the market were competitive how much lower would the price of the good be? lower What is the producer surplus of the monopolist? %24
Ruth’s Rubies is a single-price monopolist in the market for rubies. Suppose Ruth’s Rubies currently charges $200 for its rubies (i.e. sells 3 rubies). If it lowers the price to $100 (to sell 4 rubies), how large is: The quantity effect? The price effect? Price of a Ruby Quantity of Rubies Demanded Total Revenue Marginal Revenue $500 0 0 400 1 400 400 300 2 600 200 200 3 600 0 100 4 400 200 0 5 0 400
Consider the electricity industry, in which there are very large fixed costs but also in which variable costs are directly proportional to total output so that the marginal cost of each unit produced is small and constant. a) Assuming that one firm has an electricity monopoly, draw a diagram that shows the price the monopolist charges and the quantity the monopolist sells at this price. Be sure to include marginal cost, average total cost, marginal revenue, and demand curves in your diagram. What happens if the electricity industry is perfectly competitive? More specifically, let us assume that the marginal cost curve from part (a) is equal to the perfectly competitive market supply curve. In this case, show in a diagram what the perfectly competitive equilibrium price and quantity in this industry are. What will happen to the number of firms producing electricity in the long run? What does this say about the desirability of monopoly vs. perfect competition in this industry?…
. 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 (MC), marginal revenue (MR), average total cost (ATC), and demand (D) 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. Suppose that BYOB charges $2.50 per can. Your friend Clancy says that since BYOB is a monopoly with market power, it should charge a higher price of $3.00 per can because this will increase BYOB’s profit. Complete the…
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Which price and quantity combination is undesirable for both the monopolist firm and society? A and E B and F C and G D and H A and H
Which lettered point (i.e. A,B,C,D) is at the price-quantity combination that would exist under an unregulated monopoly? Which lettered point (i.e. A,B,C,D) is at the price-quantity combination that would be efficient, from society’s perspective? Which lettered point (i.e. A,B,C,D) is at the price-quantity combination that, in theory, the regulator aims for? Send to: Everyone
What determines whether or not a monopolist is able to charge different prices for the same product? Discuss the conditions necessary for successful price discrimination and offer a few examples where you think price discrimination is being practiced. Remember that the product has to be the same for it to be price discrimination. So if I pay more for overnight delivery of an item I am paying for that convenience and it is not price discrimination
Which of the following statements about monopolies are correct? There is more than one correct answer to this question. You must mark all of the correct answers to receive full credit for this question. OAt the profit maximizing output for a monopoly, P< MR. OMonopolies are always illegal in the U.S. O If a firm enjoys decreasing returns to scale, this may help it to become a monopoly. In a pure monopoly, the firm is the industry. O A patent can help a firm to become a monopoly.
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P=15−QP=15−Q Marginal Revenue: MR=15−2QMR=15−2Q Total Cost: TC=3+Q+0.5Q2TC=3+Q+0.5Q2 Marginal Cost: MC=3+QMC=3+Q where QQ is quantity and PP is the price measured in Wiknamian dollars. The monopolist produces ( ? ) soccer balls and sells them at a price of ($) each. The monopolist's profit is ($) in this case. One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market. The domestic production of soccer balls will ( rise or fall ) ? to ( ? ) soccer balls, and domestic consumption will ( rise or fall ) to ( ? ) soccer balls. Therefore, Wiknam will (…