Question

6. Calculate (a) the monopoly price, quantity, and profit for
a firm facing a demand curve (1 pt)

Q = 400 – 4P with constant MC = 40

Hint: Remember we use “inverse” demand curve where P(Q) to use
the twice as steeply sloped rule.

b) Now write out the 3 conditions necessary for a monopolist
to be able to price discriminate. (1 pt)

c) Consider a monopolist who can use 3rd degree price
discrimination by separating the above demand curve into two
markets: q1 = 150 – p1 and q2 = 250 – 3p2. [The inverse demand
curves—which is what you’ll want to use—for these two are p1 = 150
– q1 and p2 = 250/3 – 1/3q2] Calculate the price and quantity sold
in each market. (2 pts)

d) Compare the profits from price discriminating monopolist to
the non price discriminating one. (1pt)

Answer #1

A firm is selling its product in two markets. In market A the
demand is given by QA = 100 − 2P and in market B the demand is QB =
80 − 4P. The firm’s total cost is C = 10Q where Q = QA + QB is the
total output. a) Suppose the monopolist cannot discriminate between
markets A and B. What is the total demand ? (1 pt) Find the
profit-maximizing price and quantity (2 pt), and...

Imagine a firm called Bapple that is the monopoly in the market
for smartwatches, with cost-functionC(Q) = 3Q2. Imagine the inverse
demand function for smartwatches isp(Q) =400−2Q.
1.1 A. What are equilibrium price and equilibrium quantity?
1.2 B. Show the equilibrium price and equilibrium quantity
graph-ically. Include the inverse demand curve, firm’s marginal
rev-enue curve, and firm’s marginal cost curve.
Now assume that Bapple is able to perfectly price discriminate
in the market for smart-watches.
1.3 C. What three conditions...

(3rd Degree Price Discrimination) Consider a
monopolist serving two identifiably distinct markets with no resale
possible, so that the monopolist may practice third-degree price
dis- crimination. Demand in market 1 is given by
D1(p1) = 800 −
8p1 and demand in market 2 is given by
D2(p2) = 1200 −
12p2. Marginal cost is constant, M C =
10, and there is no fixed cost.
A) Find the marginal revenue curve in each
market, M R1(q1) and M
R2(q2).
B)...

We are considering a monopoly facing the demand QD = 400−5P ⇔ P
= 80−0.2QD. Its marginal cost is MC = 0.2Q − 4. (a) Find the
monopolist’s marginal revenue equation. (b) Find the monopoly price
and quantity in the market and display them in a graph below. Q $
(c) Is this new quantity produced efficient? Explain (d) Suppose
the monopolist is able to perfectly price discriminate. What
quantity will it sell, at what price? (e) Calculate and compare...

1. Consider a monopolist with unit cost c = 20, facing
two separate markets with demand functions D1(p1) = 100 - p1 and
D2(p2) = 60 - 2p2.
(a) Find the optimal prices (p1*, p2*) and quantities (q1*, q2*)
with price discrimination.
(b) Find the optimal price p* and quantity q* without price
discrimination. Compare them to the answers in (a)
(c) Compare total welfare with and without price discrimination.
Explain your answer.

Assume a monopolist is able to practice price discrimination in
two separate markets. Each market has a different demand curve for
the monopolist’s product:
Q1 = 1000 – 4P (Market 1: Maine)
Q2 = 1200 – 4P (Market 2: Texas)
Let the short-run total cost function for the monopolist be SRTC
= 100 + 0.25Q2
a. Find the quantity and price at which the monopolist will sell
in each market, and figure out the firm’s total profits from the
combined...

. Monopoly. Suppose the following schedule represents the demand
curve for a non-
discriminating, single price monopolist:
P
Q
TR MR
18 0
15 1
12 2
9 3
6 4
3 5
0 6
a. Complete the
table.
b. Plot the
demand and MR curves below.
c. Explain why
the MR of the third unit is less than its price ($9).
d. Calculate the
Elasticity of Demand at the price of...

Suppose that the (inverse) demand curve for Cranberries is given
by P = 40 − 6Q and TC = $4Q + $3Q2
What is equilibrium Price and Quantity and Profit if the market
is competitive? 4 Points
What is equilibrium Price and Quantity and Profit if there are
two firms in the market (note Q = q1 + q2)? 5
Points
What is equilibrium Price and Quantity and Profit if there are
monopoly in the market (note Q = Q)?...

2. Monopoly. Suppose the following schedule represents the
demand curve for a non- discriminating, single price
monopolist:
P Q TR MR
18 0
15 1
12 2
9 3
6 4
3 5
0 6
a. Complete the table.
b. Plot the demand and MR curves below.
c. Explain why the MR of the third unit is less than its price
($9).
d. Calculate the Elasticity of Demand at the price of $12?
e. Label the elastic, unitary elastic, and...

The inverse market demand curve facing a monopoly retailer of gold
jewelry is described by P=3000-0.5Q. The retailer buys jewelry at a
wholesale price, r, set by the monopolist manufacturer. Marginal
cost for the manufacturer is 500. The retailer has additional
marginal costs=100.
What is the profit-maximizing wholesale price for the
manufacturer?
What is the profit-maximizing retail price for the retailer?
What is the profit-maximizing quantity?
If the two firms merged, what would be the profit-maximizing retail
price and quantity?

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