Principles of Economics
7th Edition
ISBN: 9781305156043
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Question
Chapter 15, Problem 11PA
Subpart (a):
To determine
The reason for the existence of monopoly in the market.
Subpart (b):
To determine
The reason for the existence of monopoly in the market.
Subpart (c):
To determine
The reason for the existence of monopoly in the market.
Subpart (d):
To determine
The reason for the existence of monopoly in the market.
Subpart (e):
To determine
The reason for the existence of monopoly in the market.
Subpart (f):
To determine
The reason for the existence of monopoly in the market.
Subpart (g):
To determine
The reason for the existence of monopoly in the market.
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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
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?
$
Suppose the monopolist able to successfully price
discriminate between two groups by charging one group $60
and charging $35 to the other group.
c. What are the firm's profits if it charges the two prices as
mentioned above?
Price and Costs($)
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MR
P
1
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MC
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95100
Quantity
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?
Chapter 15 Solutions
Principles of Economics
Ch. 15.1 - Prob. 1QQCh. 15.2 - Prob. 2QQCh. 15.3 - Prob. 3QQCh. 15.4 - Prob. 4QQCh. 15.5 - Prob. 5QQCh. 15 - Prob. 1QRCh. 15 - Prob. 2QRCh. 15 - Prob. 3QRCh. 15 - Prob. 4QRCh. 15 - Prob. 5QR
Ch. 15 - Prob. 6QRCh. 15 - Prob. 7QRCh. 15 - Prob. 8QRCh. 15 - Prob. 1QCMCCh. 15 - Prob. 2QCMCCh. 15 - Prob. 3QCMCCh. 15 - Prob. 4QCMCCh. 15 - Prob. 5QCMCCh. 15 - Prob. 6QCMCCh. 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. 11PA
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- • , 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_forwardThe 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_forward
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