EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 11PA
Subpart (a):
To determine
Graphical illustration of cost, demand, and marginal- revenue curves for the monopolist.
Subpart (b):
To determine
Show
Subpart (c):
To determine
Monopoly profit.
Subpart (d):
To determine
Change in surplus.
Subpart (e):
To determine
Explain how would a monopolist make the decision whether to pay the fixed cost.
Subpart (f):
To determine
Explain whether the monopolist should
Subpart (g):
To determine
Explain how does the monopolist’s incentive to price discriminate differ from the social planner’s.(
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
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
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?
Suppose a profit-maximizing monopolist has total cost and marginal cost as follow TC = 8Q + 10 and MC = 8. It faces the demand curve P = 20-1/5Q. a) What is the equilibrium price and output?b) What is the total profit?c) Calculate the consumer surplus, producer surplus, and deadweight loss if the firm acts as a monopolist. Illustrate your answer with a diagram
Chapter 14 Solutions
EBK ESSENTIALS OF ECONOMICS
Ch. 14.1 - Prob. 1QQCh. 14.2 - Prob. 2QQCh. 14.3 - Prob. 3QQCh. 14.4 - Prob. 4QQCh. 14.5 - Prob. 5QQCh. 14 - Prob. 1QRCh. 14 - Prob. 2QRCh. 14 - Prob. 3QRCh. 14 - Prob. 4QRCh. 14 - Prob. 5QR
Ch. 14 - Prob. 6QRCh. 14 - Prob. 7QRCh. 14 - Prob. 8QRCh. 14 - Prob. 1QCMCCh. 14 - Prob. 2QCMCCh. 14 - Prob. 3QCMCCh. 14 - Prob. 4QCMCCh. 14 - Prob. 5QCMCCh. 14 - Prob. 6QCMCCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - Prob. 5PACh. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Prob. 11PA
Knowledge Booster
Similar questions
- The 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_forwardSolve last 3 questions please Thank youarrow_forward• , The following figure shows the demand curve and the marginal revenue (MR) curve of a monopolist supplying petroleum. Price/Cost (S) Demand MR 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Quantity (100 gallons) a) If the monopolist faces a constant marginal cost of $3, what is the optimal output that it should produce? b) If the monopolist faces a constant marginal cost of $3, at what price should it sell the optimal output? c) If the average total cost of the monopolist is $4 per liter when it produces the optimal output, determine his profit or loss.arrow_forward
- The 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_forwardThe diagram below shows a monopolist's marginal cost schedule and the demand curve. Find and depict the following items within the diagram and briefly explain how you found them: Price Monopoly Price Demand Marginal Revenue Total Surplus Quantity Maximising Quantity b) Draw a possible marginal cost curve for the monopolist into the diagram that is consistent with all the other curves that are already given. c) Based on the marginal cost curve that you constructed in part (b), find and highlight the monopolist's total costs at the monopoly price in the diagram. d) Briefly explain the shape of the marginal revenue curve as compared to the demand curve in the diagram.arrow_forwardA monopolist has a cost function given by c(y) = y2 and faces a demand curve given by P(y) = 120 − y. a. What is his profit-maximizing level of output? What price will the monopolist charge? b. Suppose you put a lump sum tax of $100 on this monopolist. What would its output be? c. If you wanted to choose a price ceiling for this monopolist so as to maximize consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling?arrow_forward
- The accompanying graph depicts the marginal revenue (MR), demand (D), and marginal cost (MC) curves for a monopoly. a. Place point P1 at the profit maximizing price and quantity assuming that the monopolist can only charge a single price. b. What are the profits of the firm if it charges a single price? $ 1225 Suppose the monopolist able to successfully price discriminate between two groups by charging one group $75 and charging $35 to the other group. c. What are the firm's profits if it charges the two prices as mentioned above? Price and Costs($) 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 $ 1625 D MR D MC 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100 Quantityarrow_forwardRent 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_forwardOnly 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 = 10 - Q Marginal Revenue:MR = 10 - 2 Q Total Cost TC= 3 + Q+0.5 Q2 Marginal Cost: MC= 1+ Q, where Q is quantity and Pis the price measured in Wiknamian dollars. a. How many soccer balls does the monopolist produce? At what price are they sold? What is the monopolist's profit? b. 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 $6.The firm is now a price taker in a competitive market What happens to the domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls? c. In our analysis of international trade in Chapter a country becomes an exporter when the price without trade is below the…arrow_forward
- 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-Q Marginal Revenue: MR = 15-20 Total Cost: Marginal Cost: TC=3+Q+0.50² MC = 3+Q where Q is quantity and P is the price measured in Wiknamian dollars. The monopolist produces soccer balls and sells them at a price of s each. The monopolist's profit is s The domestic production of soccer balls will to Wiknam will soccer balls 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. soccer balls, and domestic consumption will to in this case. In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world…arrow_forwardConfused and not sure how to solve correctlyarrow_forwardSuppose a monopolist faces a market demand that is the first two columns in the table below. Also, in the short run, assume that Total Fixed Cost equals $100 and the monopolist has Total Variable Cost according to the table. Find Total Revenue for each price and quantity combination, and then Marginal Revenue as price falls and quantity increases. Fill in the rest of the costs in the table and find profit at each price and quantity combination as the difference between Total Revenue and Total Cost. If profit is less than zero that indicates a loss. What is the maximum profit you found in this table? At what quantity and price combination is profit maximized for this monopolist? Next, verify this result by using Marginal Analysis to find the profit maximizing price and quantity combination. For each quantity, ask yourself if Marginal Revenue exceeds Marginal Cost. If it does, then profits would be increased by producing that quantity. As you go down the table to higher quantities, stop…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning