Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 9, Problem 11SQ
To determine
The total cost of the monopolist at the profit maximizing level of output.
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Exercise 4.2
"With respect to the monopoly equilibrium without price discrimination, first-degree price discrimination increases the profit of the enterprise at the expense of reducing social welfare." Do you agree with this statement? Reason your answer and represent graphically.
With regard to market structure, answer the following:
(a) A monopolist never produces in the inelastic portion of its demand curve. True or false? Why?
(b) Draw a figure showing a monopolist producing at the lowest point on its long-run average cost curve.
(c) What is third degree price discrimination? Why does a monopolist practice it? What are the conditions are necessary for the monopolist to be able to practice it? Give a real-world example of third degree price discrimination?
(c) If the price elasticity of demand is -3 in market 1 and -2 in market 2 and the price in market 1 is $12, what price should a monopolist practicing third degree price discrimination set in market 2?
Question 1. In this question we begin by constructing a competitive market for a good, and then compare the
outcome when supply is controlled by a single-price monopolist. Suppose that the demand for units of some
beverage comes from households with the preferences over units of the beverage (x1) and expenditure on all
other goods (x2) represented by the following utility function,
U(x1,x2) = 800 In(x1) + x2
Each household has an exogenous income of I per period. The second 'good' is referred to as a 'composite'
good and is an amount of money. We assume throughout that p2 = 1.
(4 marks) Derive a household's ordinary demand functions, x1(P1, 1,1) and x2(P1,1,1) when they
are price-takers in the market for the beverage. How large does the exogenous income need to be
in order for the household to enjoy a positive amount of both 'goods'?
i)
(2 marks) Suppose there are 80 households who participate in the market for the beverage. Half of
the households have an income of $1200 per period,…
Chapter 9 Solutions
Micro Economics For Today
Ch. 9.1 - Prob. 1GECh. 9.1 - Prob. 2GECh. 9.2 - Prob. 1YTECh. 9.4 - Prob. 1YTECh. 9 - Prob. 1SQPCh. 9 - Prob. 2SQPCh. 9 - Prob. 3SQPCh. 9 - Prob. 4SQPCh. 9 - Prob. 5SQPCh. 9 - Prob. 6SQP
Ch. 9 - Prob. 7SQPCh. 9 - Prob. 8SQPCh. 9 - Prob. 9SQPCh. 9 - Prob. 10SQPCh. 9 - Prob. 11SQPCh. 9 - Prob. 12SQPCh. 9 - Prob. 13SQPCh. 9 - Prob. 1SQCh. 9 - Prob. 2SQCh. 9 - Prob. 3SQCh. 9 - Prob. 4SQCh. 9 - Prob. 5SQCh. 9 - Prob. 6SQCh. 9 - Prob. 7SQCh. 9 - Prob. 8SQCh. 9 - Prob. 9SQCh. 9 - Prob. 10SQCh. 9 - Prob. 11SQCh. 9 - Prob. 12SQCh. 9 - Prob. 13SQCh. 9 - Prob. 14SQCh. 9 - Prob. 15SQCh. 9 - Prob. 16SQCh. 9 - Prob. 17SQCh. 9 - Prob. 18SQCh. 9 - Prob. 19SQCh. 9 - Prob. 20SQ
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