Question

4) Monopoly

The market demand curve for doodads takes the form QD = (80 –
P)/7.

a) Start a Table with doodad quantity ranging from 1 to 10, with
the corresponding price in each case. Graph the demand curve.

b) Calculate and add total revenue and marginal revenue, and add
the marginal revenue curve to your graph.

c) Is there any way that the monopolist can maximize profit by
producing 7 doodads? Explain.

d) Assume that there are no diminishing returns to production, so
that variable cost = 17, no matter how much is being produced. How
much will the monopolist produce? What will be the profit? What
will be the consumer surplus? Show everything on your graph.

e) What will be the monopoly profit if the monopolist can
perfectly price discriminate? Will there be any consumer surplus?
Indicate on your graph what changes (or, if

easier for you, construct a new graph).

f) What will be the consumer surplus if this were instead a
competitive market? What about the profit? Explain, and show the
result on another new graph.

Answer #1

4) Monopoly
The market demand curve for doodads takes the form QD = (80 –
P)/7.
a) Start a Table with doodad quantity ranging from 1 to 10, with
the corresponding price in each case. Graph the demand curve.
b) Calculate and add total revenue and marginal revenue, and add
the marginal revenue curve to your graph.
c) Is there any way that the monopolist can maximize profit by
producing 7 doodads? Explain.
d) Assume that there are no diminishing...

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...

a) Given the demand curve for a monopolist: Qd = 60 - 2 P and
the marginal revenue curve: MR = 30 - Q. Marginal cost equals
average cost at $14. What is the price and quantity that the
profit-maximizing monopolist will produce? Graph these curves and
label the equilibrium points. (6 pts)
b) If this were a competitive industry, what price and quantity
would be produced? Show this on the above graph and show your work
(answers) below (3...

4.Which statement isincorrect?
a.A pure monopolist’s demand curve is the market demand
curve.
b.A monopoly produces a product for which there are no close
substitutes.
c.Marginal revenue is less than price for a monopolist that
cannot price discriminate.
d.A monopolist’s market position ensures positive economic
profits.
5.For a firm with monopoly power that cannot engage in price
discrimination:
a.the marginal revenue curve lies below the demand curve because
any reduction in price
applies only to the last unit sold.
b.the...

A monopoly is facing inverse demand given by P = 40−0.5Q and
marginal cost given by MC = 7+0.1Q. Illustrate these on the graph
and answer the questions below.
(a) If the monopolist is unable to price discriminate, what is
the profit-maximizing quantity? What is the price? What is consumer
surplus? Producer surplus? Deadweight loss?
(b) Suppose instead the monopolist is able to perfectly price
discriminate. How many units will be sold? What is consumer
surplus? Producer surplus? Deadweight loss?

3. Suppose you operate a single price monopoly in the area for
hydroelectric power. Answer the following questions in relation to
your company and monopoly market structure. Given the following
information for your company
Demand: P=300-5Qd
Marginal Revenue: P=300-10Qd
Marginal Cost P=-12.5+2.5Q
a) Plot each curve on the same graph and show how the monopolist
determines the price that maximizes profit. What price will this
monopolist charge?
b) If the ATC for the price and quantity determined in a) is...

Suppose a monopolist faces the following demand curve: P = 750 –
Q.If the long run marginal cost of production is constant and equal
to $30.
a) What is the monopolist’s profit maximizing level of
output?
b) What price will the profit maximizing monopolist charge?
c) How much profit will the monopolist make if she maximizes her
profit?
d) What would be the value of consumer surplus if the market
were perfectly
competitive?
e) What is the value of the...

10. The demand for milk and the total costs of a dairy are
specified by the following equations:
P(Q) = 100 − Q
TC(q) = 30q
(a) Suppose there is a monopoly in the industry. Derive an
equation for marginal revenue of the monopolist. Graph the demand
and marginal revenue curves.
(b) Derive the marginal cost (MC) and average cost (AC) of milk
production. Graph MC and AC on the same graph as (a).
(c) Show the monopoly’s profit-maximizing price...

The demand for mysterious good X in Lansing is Q = 12 ? P, where
P is the price of good X per pound and Q is the quantity demanded
in pounds. The marginal cost of producing the good is $2 per pound.
There is no fixed cost of producing the good. There is only one
firm, Alice, who can produce the good. Alice cannot price
discriminate against any consumer. (a) What is the marginal revenue
curve? (b) What is...

Suppose a monopoly sells to two identifiably different types of
customers, A and B. The inverse demand curve for group A is PA=
20-QA, and the inverse demand curve for group B is PB= 20-2QB. The
monopolist is able to produce the good for either type of customer
at a constant marginal cost of 4, and the monopolist has no fixed
costs. If the monopolist is unableto price discriminate (no
reselling), (1) what arethe profit maximizing price and quantity,
and...

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