Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 14.9P
To determine
The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Consider 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.)
Consider a monopolist local movie theater which has two distinct client groups, adults and seniors. The inverse demands for the two group are given by:p(qA) = a − b · qAp(qB) = a/3-b/3.qB(a) Describe the demand function in the two markets graphically and then compute the demand elasticity in each market.(b) Compute the demand function qP under the assumption that the movie theather canonly offer a single price to both segments of the market. (Hint: at a given price addthe demand of the adults and senior market. You need to go from the inverse demand function to the demand function.) Illustrate the aggregate demand function in contrast to the demand functions in each segment. Now compute the optimal price of the movie theater when it can only offer a single and common price to the market segments. Who goes to the movies and who does not?(c) Next allow the movie theater to offer different prices in each segment and customerscannot mispresent their identity. What is the optimal price in…
Each year a new group of high school seniors chooses where they want to attend college. The college faces two identifiably different categories of customers, in-state and out-of-state students. The (inverse) demand equation for in-state students is given by PI=$9000- QI, while demand by out-of-state students is given by PO= $21,000 -9QO. P represents the annual tuition charged by the college and Q represents the number of students who enter as freshmen. The marginal cost of educating an additional student is constant and equal to $3000. Suppose that the Board of Trustees wants to act as a profit-maximizing monopolist in setting price and output. What tuition should they charge for in-state and out-of-state students, and how many of each would enroll each year?
Knowledge Booster
Similar questions
- You are the only seller of Melba sauce in the Albany region. The local demand for jars of Melba sauce and your marginal costs of producing the sauce are as follows: Marginal benefit (demand): P = 50 - 0.5Q Marginal cost (supply): P = 2 + 2Q What quantity of jars of Melba sauce should you optimally produce as a monopolist?arrow_forwardSuppose a monopolist operates in a market with two types of consumers (“high” and “low” types) and offers two types of goods (“high quality” and “low quality”). In general, if the monopolist wants to implement second-degree price discrimination (i.e. to sell the “high quality” good to the “high” type consumer and the “low quality” good to the “low” type consumer), they may have to set the price of the “high quality” good lower than the willingness-to-pay of the “high” type.(a) True. (b) False.arrow_forwardSuppose inverse demand is given by the following equation: P(Q) = 600 - 20Q Suppose further that you are a monopolist with constant marginal cost equal to 40. How much profit do you earn at the optimal price and quantity? A) 3920 B) 1120 C) 0 D) 4500arrow_forward
- Suppose the market for kiwis has a demand curve of the form: Qd = 200-2Pd And that the costs of the monopoly producer of kiwis are determined by Total Cost (Q) = Variable Cost (Q) + Fixed Cost. C (Q) = Q² + 100. That is, its marginal cost will be: MgC (Qs) = 2Qs = Ps a) If the monopolist's marginal revenue is Img = 100-Q, calculate the PRICE that would maximize the monopolist's profits. b) Find the producer surplus (monopolist). c) Calculate the accounting profits of the producer (monopolist), considering all costs. d) If Fixed Costs increase to $ 200, what would be the new price that would maximize the monopolist's profits?arrow_forwardQuestion 8 Firm D is a monopolist that faces a market with inverse demand given by: P = 120-4Q Where Q is Firm D's output level. Firm D's total cost function is given by: TC(Q) = 11Q +42 Assuming that Firm D can perfectly (1st degree) price discriminate, what is Firm D's profit maximizing output level, Q*? (Hint: Because Firm D can perfectly price discriminate, its Marginal Revenue function is equivalent to inverse demand).arrow_forwardPlease answer fast without plagiarism...arrow_forward
- As a manager of a music venue (assume a monopoly market), you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your theater. On weekends, the inverse demand function is P = 24 − 0.0005Q; on weekdays, it is P = 20 − 0.0025Q. Each night you hire an act to play costs about $75,000 for the band, and about $5.00 per person (staff, food, drinks). Devise a pricing strategy to maximize your firm's profits.arrow_forward1) Suppose you are operating a discount movie theater and want to increase profits by charging adults and kids different prices. Assume there are no variable costs, just fixed costs to show the movie. You estimate the inverse demand function for kids to be: p1(y1) = 4 - 0.05y1 You estimate the inverse demand function for adults to be: p2(y2) = 9.6 - 0.08y2 a) How many kids will watch a movie? What price will you charge kids? b) How many adults will watch a movie? What price will you charge adults?arrow_forwardA monopolist has a constant marginal cost of 12. Consumers' inverse demand is P = 32 - 4Q. The monopolist runs a persuasive advertising campaign that costs 26 and increases consumer demand to P = 37 - 4Q. (a) What is the gain (or loss) in the firms profits caused by the advertising campaign? b) When consumers' pre-advertising preferences are used to calculate welfare, what is the welfare gain (or loss) caused by the advertising campaign? Answer 2 Question 1 (c) When consumers' post-advertising preferences are used to calculate welfare, what is the welfare gain (or loss) caused by the advertising campaign? Answer 3 Question 1arrow_forward
- A monopolist has a cost function of c(y) = y so that its marginal costs are constant at $1 per unit. It faces the following demand curve: D(p) = {100/p if ps 20. 0, if p> 20%3; (a) What is the profit-maximizing choice of output? (b) If the government could set a price ceiling on this monopolist in order to force it to act as a competitor, what price should they set? (c) What output would the monopolist produce if forced to behave as a competitor?arrow_forwardSuppose there exists a costless way to charge drivers on the freeway. Under this costless system, tolls on the freeway would be adjusted according to traffic conditions. For example, when traffic is usually heavy, as it is from 6:30 a.m. to 9:00 a.m. on a weekday, the toll to drive on the freeway would be higher than when traffic is light. In other words, freeway tolls would be used to equate the demand for freeway space with its supply. Would you be in favor of such a system to replace our current (largely zero price) system? Explain your answer.arrow_forwardA manager of a nightclub realizes that demand for drinks is more elastic among students and is trying to determine the optimal pricing schedule. Specifically, he estimates the following average demand for his customer types: Under 25: qr =18-5p Over 25: q=10-2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the club $2 to make. If the manager can charge a separate entry fee and a price per drink for each group, what two-part price will the manager set for reach group. Now suppose that once again it is impossible to identify which group the customers belong. Suppose the manager lowers the price of drinks to equal to marginal cost and still wanted to attract both customers, what entry fee would the manager set? Compare the profits earned in parts a) to d). Which scheme would you choose if you could not identify customer type and which would you choose if you could identify customer type.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
