Question

Hawkins micro brewery has a monopoly on oatmeal stout in the local
market. The inverse demand is P = 50 - 0.5Q. The marginal revenue
is MR = 50 - 1Q. MC = 5 + 0.5Q.

Calculate Hawkins profit maximizing output.

Calculate the producer surplus.

Calculate the dead-weight loss.

What is the optimal price ceiling?

If Hawkins was able to practice perfect price discrimination
what price would it charge?

What is the new prucer surplus.

Answer #1

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?

Suppose the inverse demand for a product produced by a single
firm is given by P = 200 ? 5Q and that for this firm MC = 20 +
2Q.
a) ) If the firm cannot price-discriminate, what are the
profit-maximizing price and level of output?
b) If the firm cannot price-discriminate, what are the levels of
producer and consumer surplus in the market? What is the deadweight
loss? Both compute and illustrate each on a graph.
c) If the...

Inverse Demand Equation: P=160–4Qd Marginal Revenue =
160-8Qd Marginal Costs = $0
What is price and quantity under perfect
competition?
What price would a monopoly charge? How much will it
produce?
What is the deadweight loss due to
monopoly?
If the monopolist can practice perfect price
discrimination what is consumer surplus? What is producer
surplus?

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...

(a) Consider a monopoly market with the following demand
equation for a good Z.
P = 100 – 0.2 Q
Suppose fixed cost is zero and marginal cost is given by MC =
20.
Answer the following questions.
(i) Based on the information given, draw the diagram which shows
the marginal revenue (MR) curve, marginal cost (MC) curve and the
demand (D) curve of the monopoly. Show the value of X and Y
intercepts for these curves.
(ii) Explain why...

he inverse demand function faced by a monopoly is given
byP=103Q. The monopolyhas a total cost functionTC=Q2+2Q and a
marginal cost function MC=2Q+2.
(a) What are the monopolist’s profit maximizing price and
quantity? Show these and theassociated deadweight loss on a
diagram.
(b) Calculate what price and quantity would prevail if this were
a perfectly competitive marketwith the marginal cost curve acting
as the supply curve? Show this price on your diagramfor part
(a).
(c) If the government imposes a...

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?

1. Consider a market with inverse demand P (Q) = 100 Q. A
monopolist with linear cost C(Q) = 20Q serves this market.
(a) Find the monopolistís optimal price and quantity.
(b) Find the price, quantity, proÖt, consumer surplus, and
social welfare under perfect competition.
(c) Find the optimal proÖt, consumer surplus, social welfare
and the deadweight loss for monopoly.
(d) What is the % loss in social welfare as we move from perfect
competition to monopoly.

Aqua Pure has a natural monopoly on providing water to
households in a local apartment complex. They can provide water at
an average cost of ATC = 240/Q + 6, and a constant marginal cost of
MC = $6. Demand for water in the apartment complex is given by P =
40 – 0.5Q. What is Aqua Pure’s unregulated monopoly price, the
socially optimal price, and the fair-return price?
Monopoly Price: $ _______
Socially Optimal Price: $ _______
Fair-Return Price:...

Aqua Pure has a natural monopoly on providing water to
households in a local apartment complex. They can provide water at
an average cost of ATC = 240/Q + 6, and a constant marginal cost of
MC = $6. Demand for water in the apartment complex is given by P =
40 – 0.5Q. What is Aqua Pure’s unregulated monopoly price, the
socially optimal price, and the fair-return price?
Monopoly Price: $
Socially Optimal Price: $
Fair-Return Price: $

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