EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 10, Problem 7SP
To determine
Explain the concept of elasticity and
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In the following table, which contains the demand schedule for a monopolist, enter the total revenue (TR) and marginal revenue (MR) for each price. For each price–quantity combination (that is, table row), indicate whether demand is elastic, unitary elastic, or inelastic at that point on the demand curve.
Hint: Do not calculate the price elasticity of demand mathematically. Instead, use what you know about elasticity along different segments of a linear demand curve to determine the elasticity of each price–quantity combination.
Use the following demand schedule for a pure monopolist to calculate total revenue and marginal revenue at each quantity. Plot the monopolist’s demand curve and marginal-revenue curve, and explain the relationships between them. Explain why the marginal revenue of the fourth unit of output is $3.50, even though its price is $5. What generalization can you make as to the relationship between the monopolist’s demand and its marginal revenue? Suppose the marginal cost of successive units of output was zero. What output would the single-price monopolist produce, and what price would it charge?
Hi! I got stuck with my microeconomics homework. Can you please help? Here's the problem:
A monopolist knows that in order to expand the quantity of output it produces from 8 to 9 units it must lower the price of its output from $2 to $1. Calculate the quantity effect and the price effect. Use these results to calculate the monopolist’s marginal revenue of producing the 9th unit. The marginal cost of producing the 9th unit is positive. Is it a good idea for the monopolist to produce the 9th unit?
It is from Microeconomics: Canadian Edition
by Paul Krugman; Robin Wells; Iris Au; Jack Parkinson
Chapter 10 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- The accompanying diagram shows the demand , marginal revenue , and marginal cost of a monopolist . [ You are highly recommended to demonstrate your work on the graph as well . ] a ) Determine the profit - maximizing output and price . b ) What price and output would prevail if this firm's product were sold by price - taking firms in a perfectly competitive market ? c ) Calculate the deadweight loss of this monopoly .arrow_forwardThe following graph gives the demand (D) curve for satellite TV 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 satellite TV 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 subscription) 100 90 80 70 20 10 0 + 0 2 MR True 6 8 10 12 14 QUANTITY (Number of subscriptions) 16 O False ATC MC 18 20 D Which of the following statements are true about this natural monopoly? Check all that apply. Monopoly Outcome In order for a monopoly to exist in this case, the government must have intervened and created it. The satellite TV 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. The satellite TV company…arrow_forwardConfused and not sure how to solve correctlyarrow_forward
- Rent seeking The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps relieve arthritis pain. Place the grey point (star symbol) in the appropriate location on the graph to indicate the monopoly outcome such that the dashed lines reveal the profit-maximizing price and quantity of a single-price monopolist. Then, use the green rectangle (triangle symbols) to show the profits earned by the monopolist. table 1 Suppose that should the patent on this particular drug expire, the market would become perfectly competitive, with new firms immediately entering the market with essentially identical products. Further suppose that in this case the original firm will hire lobbyists and make donations to several key politicians to extend its patent for one more year. The firm is prepared to spend up to $_____ million to extend its patent.arrow_forwardSuppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of $45.00 per unit. If the elasticity of demand for the product is - 2.50, find the marginal cost of the last unit produced. The marginal cost of the last unit produce is $. (Enter your response rounded to two decimal places.) What is the firm's percentage markup of price over marginal cost? The firm's percentage markup of price over marginal cost is percent. (Enter your response rounded to two decimal places.) Suppose that the average cost of the last unit produced is $12.00 and the firm's fixed cost is $2000. Find the firm's profit. The firm's profit is $ (Enter your response rounded to two decimal places.)arrow_forwardThe following graph shows the demand (D) for cable services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable 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. Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The cable company is experiencing economies of scale. The cable company must own a scarce resource. The cable company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True Falsearrow_forward
- The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps releve arthritis pain. Place the grey point (star symbol) in the appropriate location on the graph to Indicate the monopoly outcome such that the dashed lines reveal the profit-maximizing price and quantity of a single-price monopolst. Then, use the green rectangle (triangle symbols) to show the profits earned by the monopolist. 10 Manapaly Outcome Manapaly Profits 4 MC = ATC 1. MR Damand 3 4 QUANTITY (Millians of dasas par yaar) 5 6 10 1 2 6 8 Suppose that should the patent on this particular drug explre, the market would become perfectly competitive, with new firms Immedlately enterling the market with essentially Identical products. Further suppose that In this case the original firm will hire lobbylsts and make donations to several key politicians to extend Its patent for one more year. The firm Is prepared to spend up to $ million to extend…arrow_forwardplease make sure to complete the second part of the question. thank youarrow_forwardThe 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 response to the nearest whole number.) . (Round your The price charged for the last unit sold by this monopolist is $ (Round your response to the nearest dollar.) The monopolist's profit is $. (Round your response to the nearest dollar.) (...))) Price ($) 200- 180- 160- 140- 120 100- 80+ 60 40 20 of 0 MC ATC D MR 50 100 150 200 250 300 350 400 450 500 Quantity Qarrow_forward
- The accompanying graph depicts the marginal revenue (MR), demand (D), and marginal cost (MC) curves for a monopoly. 100 a. Place point P1 at the profit maximizing price and quantity 95 assuming that the monopolist can only charge a single price. 90 85 80 75 70 1 b. What are the profits of the firm if it charges a single price? 65 60 55 50 45 40 35 30 25 MC 20 15 Suppose the monopolist able to successfully price 10 discriminate between two groups by charging one group $70 5 MR and charging $35 to the other group. 05 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantity c. What are the firm's profits if it charges the two prices as mentioned above? $ Price and Costs($)arrow_forwardThe accompanying graph depicts the marginal revenue (MR), demand (D), and marginal cost (MC) curves for a monopoly a. Place point Pi at the profit maximizing price and quantitvy assuming that the monopolist can only charge a single price. 100 95 90 85 80 75 70 65 2 60 b. What are the profits of the firm if it charges a single price? 50 45 Suppose the monopolist able to successfully price discriminate between two groups by charging one group $60 and charging $35 to the other group. c. What are the firm's profits if it charges the two prices as mentioned above? 35 30 25 20 15 10 MR 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantityarrow_forwardHow much is total surplus if the market is perfectly competitive?How much is total surplus if the market is controlled by a single price monopolist?Suppose the single price monopolist started charging all customers the maximum price they are willing to pay. How much additional surplus is created?arrow_forward
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