Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
13th Edition
ISBN: 9781337742535
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 20.2, Problem 4ST
To determine
The infant industry argument.
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Suppose that a Monopolist has no fixed costs and a fixed Marginal Cost equal to $4 per unit. This
monopolist also faces the demand:
Q = 28-p
5. [3 points] If this monopolist is a single-price monopolist, then what price would it charge
and what Quantity would it produce? What would be the Consumer Surplus (CS),
Producer Surplus (PS), and Total Surplus (TS) in the single-price case?
Now suppose that this firm can first-degree price discriminate.
6. [2 points] What would be the Consumer Surplus (CS), Producer Surplus (PS), and Total
Surplus (TS) in the case where this monopolist can first-degree price discriminate?
Now suppose that this firm cannot first-degree price discriminate, but can instead second-degree
price discriminate. Now suppose that this monopolist offers the menu of:
12 units for p = $16
• 18 units for p = $10
7. [2 points] Will the above make consumers better off? Will it make firms better off?
Now suppose that this monopolist continues to second-degree price…
If the Bank of Canada wants to increase the money supply, it can:a) Lower the target for the overnight interest rateb) Raise the target for the overnight interest ratec) Buy government bonds through open-market operationsd) Sell government bonds through open-market operationse) Both a) and c)
Chapter 20 Solutions
Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
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