Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 14, Problem 4MC
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Assume the cost of producing the goods is zero and that each consumer will purchase each good as long as the price is less than or equal to value. Consumer values are given in the following table.
Consumer A Consumer B
Good 1 $2,300 $2,800
Good 2 $1,700 $1,200
What is the total profit to the monopolist from selling the goods separately? a. $4,500 b. $6,300 c. $7,000 d. $6,000
How much profit would this monopolist earn?
The graph below shows the demand and marginal cost curves for the monopolist Mr. Peanut. a. Draw the marginal revenue curve. Plot only the endpoints of the graph below.The graph below shows the demand and marginal cost curves for the monopolist Mr. Peanut. a. Draw the marginal revenue curve. Plot only the endpoints of the graph below. b. What are the values of the profit-maximizing output and price? Output: Price: $ c. What are the values of output, price and total revenue when the firm’s total revenue is maximized? Output: Price: $ Total revenue: $
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Managerial Economics: A Problem Solving Approach
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- Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?arrow_forwardAre my answers for d,e and f correct? D. False E. True F. Truearrow_forwardThe following table shows the cost and revenue data for Molly the monopolist. Total Revenue Marginal Revenue Marginal Cost Quantity per Period 0 1 2 3 4 5 6 7 8 Price $30 30 29 AN 28 27 26 25 24 22 20 $ $ Total $ a. Complete the table above. b. What are Molly's profit-maximizing output and price, and what will be the amount of her profit? Output: Price:$ Profit: $ c. Suppose that the demand for Molly's product increased by three units at every price level. Complete the table below. Quantity per Marginal Marginalarrow_forward
- 2. A monopolist faces demand p = 10 - Q and has costs TC = 10 + 2q. a. Provide expressions for marginal revenue and marginal cost. b. Maximize the firm's profit to determine the equilibrium price, quantity, and profit. c. The monopolist faces the prospect of entry by competitor with the same cost function. If the firm enters, they will compete by choosing quantities. Does the monopolist need to worry about this entry threat? Explain. d. The government is considering a subsidy of 4 for all firms in this industry. Should the monopolist support or oppose this policy? Explain.arrow_forwardHow do I do this?arrow_forwardThe graph to the right includes a monopolist's demand, marginal revenue, average total cost, and marginal cost curves. 1.) Use the point drawing tool to Indicate the profit-maximizing level of output and price. Label this point 'Point A' 2.) Use the rectangle drawing tool to shade in economic profitsLabel this shaded area 'Profit'. Carefully follow the instructions above, and only draw the required objects.arrow_forward
- 1. Briefly explain why the following statements are TRUE or FALSE: 1. A monopolist produces the quantity at which MC = MR. 2. A monopolist sets a price equal to MR. 3. A monopolist faces a downward- sloping MR curve. 4. A monopolist faces a perfectly elastic demand curve. 5. A monopolist must lower price if it produces additional units. 6. A monopolist is always able to price discriminate.arrow_forwardSuppose both a monopolist and a perfectly competitive firm charge a price corresponding to the quantity at the intersection of the marginal cost and marginal revenue curves. If this price is between each firm's average variable cost and average total cost curves, a. both firms will shut down in the short run. b. both firms will continue to operate in the short run. c. the perfectly competitive firm will continue to operate in spite of the loss but the monopolist will earn a profit. d. the perfectly competitive firm will continue to operate in the short run but the monopolist will shut down.arrow_forward3. A monopolist faces a demand curve given by Q = 70 - P. The monopolist's marginal revenue function is given by MR = 70- 2Q. a. If the monopolist can produce at constant average and marginal costs of AC = MC = 6, what output level will the monopolist choose in order to maximize profits? What is the price at this output level? What are the monopolist's profits? b. Assume instead that the monopolist has a cost structure where total costs are described by TC = 0.25Q2 - 5Q+ 300 and marginal cost is given by MC=0.50-5. With monopolist facing the same market demand and marginal revenue, what price-quantity combination will be chosen now to maximize profits? What will profits be?arrow_forward
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