Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 14.5P
a)
To determine
To find:
Output level,
b)
To determine
To know:Output level, price and profit earned by monopolist.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Acme is a monopolist for a good with inverse demand P = 4000 – 6Q, where P is the price in
dollars and Q is the amount sold. Acme's variable costs are TVC(Q) = 4Q². With these
functions, the marginal revenue is MR(Q) = 4000 – 12Q and marginal cost is MC(Q) = 8Q.
a) If Acme has no fixed costs, what is its profit maximizing price?
b) If Acme has non-sunk fixed costs of $700,000, is it worth operating or should they shut
down?
Consider a monopolistic market with demand function:
P = 36 – 0.5Q
The monopolist’s marginal cost (MC) and total cost (TC) function are:
MC = $2 TC = 4 + 2Q
How much total economic profit does the monopolist earn?
You are the manager of a monopoly. A typical consumer’s inverse demand function for your firm’s product is P = 250 − 40Q, and your cost function is C(Q) = 10Q. a. Determine the optimal two-part pricing strategy. b. How much additional profit do you earn using a two-part pricing strategy compared with charging this consumer a per-unit price?
Knowledge Booster
Similar questions
- Albert and Johny are the only sellers of Motorbikes in Ireland. The inverse market demand function for motorbikes is P(Y)= 200- 2Y . Both firms have the same total cost function: T(C)= 12Y and the same marginal cost: M(C)=12. Suppose now that the two firms decide to act like a single monopolist. What will the total quantity of Motorbikes sold in the market be and what will the equilibrium price be? Represent the profit maximisation problem on a graph and indicate the price and quantity at the equilibrium. Calculate the total profit made by the two firms when they act like a monopoly. Compare it with the total profit they were making in the Stackelberg oligopoly. For the two firms to be willing to agree to act as a monopoly, how should they split the quantity to produce between them? We assume that if they do not agree to act like a monopoly, then the market structure is the Stackelberg oligopoly studied above. We further assume that no money transfer is possible between the two…arrow_forwardSuppose that the monopolist is able to charge different prices in the two markets. The inverse demand curve in market 1 is p,=207-0.9q1. The inverse demand curve in market 2 is p2=226-0.7q2. The firm's total cost function is C(q,+q2)=(qj+q2)². What is the firm's optimal choice of q,?arrow_forwardThe demand function for a monopolist is given by: P1 = 1,250 – 3.5Q and the cost function is given by C(Q) = 1,200 +1.5Q + 0.8Q. This firm, Otsuka, is a pharmaceutical holding a patent on a depression treatment, Rexulti. However, the patent expired, and a generic treatment is offered in the market. Now, the new market price is P=$400. Based on this information, determine the following: (Use no decimals in final answers). %3D a. The optimal Q with the pattent is: $ b. The optimal P with the pattent is: $ c. The optimal profits with the pattent is: $ d. The optimal Q with the generic treatment is: $ e. The optimal P with the generic treatment is: $ f. The optimal profits with the generic treatment is: $ g. In this which of the statement is correct? (A, B, C, or D). A. The lost of the patent changed the market condition from monopoly to oligopoly. B. The lost of the patent changed the market condition from PCM to monopoly. C. The lost of the patent changed the market conditions from…arrow_forward
- Market research shows that a particular monopolist faces a market demand function given byIts cost function isP （Q） = 50 - 2Q.C（Q）= 47 + 10Q What is the monopoly market price and quantity? What is the monopolist’s profit? What is consumer surplus at the monopoly price? What would the price and quantity be in this market be if the monopolist behaved as in perfect competition? What is the consumer surplus in the case of perfect competition? Which is higher and why? What is the “social cost” of monopoly?arrow_forwardA different industry has a Demand curve given by Q = 100 p − 1 2 Assume that a monopolist supplies this industry. The cost function of this monopolist is c(Q)=2*Q. What is the price the monopolist charges? What is the quantity the monopolist sells?arrow_forwardA monopolist has discovered that the inverse demand function of a person with income Y for the monopolist’s product is P = 0.002Y-Q where P is the price, Y the income, and Q is the output. The monopolist can observe the incomes of its consumers and hence vary its price accordingly. The monopolist has a total cost function C(Q) = 100Q. A. Calculate the profit maximising price as a function of the consumer’s income Y carefully explaining all the steps in the derivation of the formula. B. 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=1,200-200P1. Calculate the profit maximising output produced and price charged in each country by the…arrow_forward
- A monopolist's demand function is P = 1624 - 4Q, and its total cost function is TC = 22,000 + 24Q -4Q2 + 1/3 Q3, where Q is output produced and sold. At what level of output and sales (Q) and price (P) will total profits be maximized? At what level of output and sales (Q) and price (P) will total revenue be maximized? At what price (P) should the monopolist shut down?arrow_forwardConsider the case of a monopolist who has the ability to perfectly price discriminate by charging each one of its customers a two-part tariff. Suppose for simplicity that there are only two consumers, Mary and Terry. Mary demand for the good is 2/3 of the aggregate demand. The aggregate demand is given by Q=550-3p, where Q denotes the total quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 5 Q + 100 Find the two-part tariff that the firm will charge Mary in order to maximize its profit. Then enter the fee of this two-part tariff below. (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)arrow_forwardThe demand function for a monopolist is given by: P1 = 1,250 – 3.5Q and the cost function is given by C(Q) = 1,200 +1.5Q + 0.8Q2. This firm, Otsuka, is a pharmaceutical holding a patent on a depression treatment, Rexulti. However, the patent expired, and a generic treatment is offered in the market. Now, the new market price is P=$400. What is optimal Q given the new market price?arrow_forward
- A (classic) monopolist faces a demand curve given by Q(P) = 100 – 0.25P and a continuously divisible product in a factory with cost function TC(Q) = 3.5Q^2 + 100Q + 600.a: Calculate the inverse demand curve P(Q), total revenue curve TR(Q), marginal revenue curveMR(Q), and marginal cost curve MC(Q).b: Carefully write out this firm’s profit maximization problem, using the particulars of thisproblem.c: Give the marginal condition (equation) that characterizes the solution to this problem. Solvethis condition for the firm’s optimal quantity Q*.d: Calculate the optimal price.e: Calculate the firm’s maximized profit.f: On a graph with quantity on the horizontal axis, neatly plot the marginal revenue curve andmarginal cost curve. Show Q* on your graph.g: Label areas on your graph using a, b, c, etc. and indicate the areas that correspond to totalrevenue, variable cost, and producer surplus at Q*.h: Calculate the firm’s producer surplus at Q*arrow_forwardA monopolist is deciding how to allocate output between two geographically separated markets. The demand curve for the firm's output in each market is: P1 = 4,000 - 100Q1 P2 = 2,000 - 50Q2 Where P1 and P2 are the prices of the product in each market and Q1 and Q2 are the amounts sold in each market. The firm's marginal cost curve is: MC = 25Q where Q is the firm's entire output (Q = Q1 + Q2) a) how many units should the firm sell in each market? (Keep Q1 and Q2 in decimal form) b) What price should it charge in the first market? (Use Q1 in decimal form) c) What price should it charge in the second market? ( Use Q2 in decimal form)arrow_forwardA monopolistic producer of two goods has a total cost function TC = 5Q1+10Q2 and a total revenue TR = 50Q1- Q12 – 2Q2Q1+100Q2– 4Q2² i) Calculate the values of Q1 and Q2 will yield a maximum profit ii) Using the Hessian, prove that the firm's profit is at a maximum.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
