Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
8th Edition
ISBN: 9781337292603
Author: Mankiw
Publisher: Cengage Learning (2018)
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 10PA
Subpart (a):
To determine
The profit maximization, dead weight loss and social welfare.
Subpart (b):
To determine
The profit maximization, dead weight loss and social welfare.
Subpart (c):
To determine
Dead weight loss.
Subpart (d):
To determine
The profit maximization, dead weight loss and social welfare.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD
Demand :P =1000-10Q
Total Revenue : TR=1000Q-10Q2
Marginal Revenue: MR=1000-20Q
Marginal Cost: MC=100+10Q
Where Q indicates the number of copies sold and P is the price in Ectenian dollasrs.
a. Find the price and quantity that maximize the company's profit
b. Find the price and quantity that would maximize social welfare
c. Calculate the deadweight loss from monpoly.
d. Suppose in addition to the costs above. the director of the film has to be paid. The company is considering four options
i. a flat fee of 2000 Ectenian dollars
ii. 50 percent of the profits.
iii. 150 Ectenian dollars per unit sold
iv. 50 percent of the revenue.
For each option, calculate the profit-maximizing price and quantity. Which if any of these compensation schemes would alter the deadweight loss from monopoly. Explain.
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new
DVD:
Demand:
P= 1,200 - 10Q
Total Revenue:
TR = 1,2000 - 10Q
Marginal Revenue: MR 1,200 - 200
Marginal Cost:
MC = 300 + 100
where Q indicates the number of copies sold and Pis the price in Ectenian dollars.
Complete the following table by finding the price and quantity that maximize the company's profit and the price and quantity that maximize social
weifare.
Price
Quantity
Scenario
(Dollars)
(DVDs)
Maximizes the company's profit
Maximizes social weifare
The deadweight loss from the monopoly is S
Suppose, in addition to the foregoing costs, the director of the fim has to be paid. The company is considering four options:
09.
Chapter 15 Solutions
Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
Ch. 15.1 - Prob. 1QQCh. 15.2 - Prob. 2QQCh. 15.3 - Prob. 3QQCh. 15.4 - Prob. 4QQCh. 15.5 - Prob. 5QQCh. 15 - Prob. 1CQQCh. 15 - Prob. 2CQQCh. 15 - Prob. 3CQQCh. 15 - Prob. 4CQQCh. 15 - Prob. 5CQQ
Ch. 15 - Prob. 6CQQCh. 15 - Prob. 1QRCh. 15 - Prob. 2QRCh. 15 - Prob. 3QRCh. 15 - Prob. 4QRCh. 15 - Prob. 5QRCh. 15 - Prob. 6QRCh. 15 - Prob. 7QRCh. 15 - Prob. 8QRCh. 15 - Prob. 1PACh. 15 - Prob. 2PACh. 15 - Prob. 3PACh. 15 - Prob. 4PACh. 15 - Prob. 5PACh. 15 - Prob. 6PACh. 15 - Prob. 7PACh. 15 - Prob. 8PACh. 15 - Prob. 9PACh. 15 - Prob. 10PACh. 15 - Prob. 11PACh. 15 - Prob. 12PA
Knowledge Booster
Similar questions
- For the Water Utility, it costs $50,000 per month to lease the land and equipment for the water treatment facility and pumping station and maintain the water supply system. It costs $10Q to deliver water to households (Q is thousands of gallons). The town’s monthly demand for water is QD = 5000 – 100P, where P is price. Calculate the quantity of water, the price, total revenue, total cost, total profit, marginal revenue, marginal cost, the markup, the profit margin, and marginal profit at unregulated price and quantity of water. What price per gallon will they charge?arrow_forwardSuppose that a local government is considering placing a tax on the rental of rooms on Airbnb. Before the tax, the total revenue earned by hosts using Airbnb was $10,000,000 per year. a) If the government imposes a 10% tax on these rooms, will they earn more or less than $1,000,000 in tax revenue if the market is assumed to be perfectly competitive? b) Will local residents who rent their homes (as tenants) benefit from this policy? (Use a diagram to explain) c) Does your answer to a) or b) change if there are a fixed (and small) number of rooms available to rent in the area?arrow_forwardRound off your final answer to whole #. A company produces and sells a consumer product and is able to control the demand by varying the selling price. The approximate relationship between price and demand is 2700 5,000 p=47+ -forD>1 D D² The company is seeking to maximize its profit. The fixed cost is $1,000 and the variable cost is $39 per unit. What is the number of units that should be produced and sold each month to maximize profit?arrow_forward
- Suppose that Sony Corporation has developed a new all in one, easy to use, big screen computer / TV (‘BCTV’). This BCTV is unique in the market and Sony estimates that the demand for this new BCTV is: P = 13 – Q, where P is in thousands of dollars and Q is in thousands of BCTVs. The total cost of producing the BCTV is given by TC = 2 + 7Q where TC is in thousands of dollars. Samsung is considering entering the same market with its own BCTV and faces the same cost curve as Sony. Currently Sony has the capacity to produce 2000 units (i.e., Q = 2). Sony is considering whether to expand its capacity to produce 4000 units (i.e., Q = 4). This would double fixed costs for Sony. Samsung would enter the market with 2000 units of capacity if they entered the market. Both firms plan to use all of their capacity and sell at the resulting market price. a. Construct the payoff matrix for this game b. Does either firm have a dominant strategy? c. What is the Nash equilibrium? d. If Sony…arrow_forwardBased on Zangwill (1992). Murray Manufacturing runs a day shift and a night shift. Regardless of the number of units produced, the only production cost during a shift is a setup cost. It costs $8000 to run the day shift and $4500 to run the night shift. Demand for the next two days is as follows: day 1, 2000; night 1, 3000; day 2, 2000; night 2, 3000. It costs $1 per unit to hold a unit in inventory for a shift. a. Determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. (Note: Not all shifts have to be run.) b. After listening to a seminar on the virtues of the Japanese theory of production, Murray has cut the setup cost of its day shift to $1000 per shift and the setup cost of its night shift to $3500 per shift. Now determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. Show that the decrease in setup costs has actually raised the average inventory level. Is this…arrow_forwardOn the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 6, 12, 15, 18, 24, and 30 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. Calculate the total revenue if the firm produces 6 versus 5 units. Then, calculate the marginal revenue of the sixth unit produced. The marginal revenue of the sixth unit produced is________. Calculate the total revenue if the firm produces 12 versus 11 units. Then, calculate the marginal revenue of the 12th unit produced. The marginal revenue of the 12th unit produced is_________.arrow_forward
- Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $50 and a fixed cost of $22,500. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States to maximize its profits. The demand for BMWS in each market is given by: QE = 8,000 - 80PE and Qu = 4,000 - 20 Pu, where the subscript E denotes Europe, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only. Support your answers %3D graphically as well. a. If, by an international agreement between Europe and United States, BMW were forced to charge the same price in each market, what would be the quantity sold in each market, the equilibrium price, and the company's profit? b. Suppose now that Europe and United States signed a new trade package under which BMW now can charge different prices across the two markets. What quantity of BMWS should the firm sell in each market, and what…arrow_forwardSuppose that the fish processor could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the water park would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,000 per week, and the water park's economic profit is $2,600 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,700 per week, and the water park's economic profit is $1,500 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the fish processor's economic profit and the water park's economic profit combined) with and without recycling. Action Profit Fish Processor Water Park Total (Dollars) (Dollars) (Dollars) No Recycling 1,700 1,500 Recycling 1,000 2,600 Total economic profit is…arrow_forwardSuppose that the fish processor could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the boat tour would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,300 per week, and the boat tour's economic profit is $1,900 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,600 per week, and the boat tour's economic profit is $1,100 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the fish processor's economic profit and the boat tour's economic profit combined) with and without recycling. Action Profit Fish Processor Boat Tour Total (Dollars) (Dollars) (Dollars) No Recycling 1,600 1,100 Recycling 1,300 1,900 Total economic profit is highest…arrow_forward
- Suppose that the fish processor could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the water park would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,100 per week, and the water park's economic profit is $2,600 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,800 per week, and the water park's economic profit is $1,500 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the fish processor's economic profit and the water park's economic profit combined) with and without recycling. Profit Fish Processor Action (Dollars) Water Park (Dollars) Total (Dollars) No Recycling Recycling 1,800 1,500 1,100 2,600 Total economic profit is highest when the recycling production method is $1,500…arrow_forwardA company is the sole producer of holographic TVs. The daily demand for these TVs is Q=10,200 - 100P, where Q is the quantity demanded and P is the price. The cost of producing the TVs is (note that this implies that marginal cost is equal to Q, MC = Q). What is the company’s total revenue schedule? What is the company’s marginal revenue schedule? What is the profit maximising number of TVs that the company must produce each day? What price should it charge per TV? What is the daily profit?arrow_forwardSuppose that you are a manager for a firm like EBC Brakes, which manufactures brakes for automobiles and motorcycles. Your company has two plants, one in the United States and the other in the United Kingdom. The following tables include estimated demand and marginal revenue for your brakes, along with the marginal costs at the two factories. what quantity and price maximize your firms profit? What is the profit – maximizing number of brakes produced in the U.S. plant? In the U.K. plant? Quantity Demanded (brakes per hour) Price (dollars per brake) Quantity Produced in the U.K. plant (brakes per hour) Quantity Produced in the U.S. (brakes per hour) Total Quantity Produced Marginal Cost (dollars per brake) Marginal Revenue (dollars per brake) 104 196 47 42 89 66 92 105 195 48 44 92 68 90 106 194 49 46 95 70 88 107 193 50 48 98 72 86 108 192 51 50 101 74 84 109 191 52 52 104…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education