Question

Consider the following total cost function for an individual
firm:

C(q) = 10+ q + (1/4)q^2

The industry demand is estimated to be:

Q = 100 - P

1) Now suppose there is a monopolist facing the industry demand. Write down the monopolist's pro t function.

2) What is the equation of the monopolists marginal revenue function? Also, explain how the monopolist's marginal revenue function differs from the marginal revenue function of a firm in a long-run perfectly competitive market.

3) What are the monopoly equilibrium levels of price and output?

4) If instead of maximizing profit, the firm wanted to maximize revenue, what price would it set?

5) Numerically verify that the inverse elasticity rule of
monopoly pricing, i.e. (P-MC)/P = 1/|e* ^{d}*| is
correct in this particular equilibrium

Answer #1

Suppose the (inverse) demand function facing a firm is p(q)=10 –
q, where p is the price, q is quantity.
1. Draw the (inverse) demand function and marginal revenue. Show
your detailed work such as slope, intercept.
2. Suppose the firm has a marginal cost MC=q, and it is the only
firm in the market (that is, monopoly). Find the output level and
price set by the firm based on your graph in (1). (You do not need
to derive...

1) The inverse demand curve a monopoly faces
is
p=110−2Q.
The firm's cost curve is
C(Q)=30+6Q.
What is the profit-maximizing solution?
2) The inverse demand curve a monopoly faces
is
p=10Q-1/2
The firm's cost curve is
C(Q)=5Q.
What is the profit-maximizing solution?
3) Suppose that the inverse demand function for
a monopolist's product is
p = 7 - Q/20
Its cost function is
C = 8 + 14Q - 4Q2 + 2Q3/3
Marginal revenue equals marginal cost when output
equals...

Consider a pure monopolist who faces demand Q= 205 - 2P and has
a cost function C(Q) = 2Q.
Solve for the information below, assuming that the monopolist is
maximizing profits.
The monopolist is able to produce at a constant marginal cost of
_________
The monopolist's profit-maximizing level of output is Q* =
______
The monopolist's profit-maximizing price is P* = _________

A monopolist facing a market demand Q = 240 – 2p has the total
cost function TC(q) = q2. Draw carefully the relevant
graph with MC, MR, D curves and identify all relevant points,
intersections, intercepts.
(a) What is the monopolist’s profit maximizing quantity and
price?
(b) If the market is reorganized as perfectly competitive, what
should be the market price and quantity?
(c) Calculate the DWL associated with the monopoly in (a).
Now the government notices that the monopolist...

Consider a Monopoly. Suppose the Demand function for the
industry is Q = 440 − 4P. The total cost (TC) function for the firm
is TC = 2.25Q^2 + 1,600. The marginal revenue (MR) function is then
MR = 110 – 0.5Q. If the marginal cost (MC) function for the firm is
MC = 4.5Q, what is the price the Monopoly will charge?
Group of answer choices
$4.50
$104.5
$110
$440

Monopoly
Consider a monopoly facing an inverse demand function P(q) = 9 − q
and having a cost
function C(q) = q.
(a) Find the profit maximizing output and price, and calculate the
monopolist’s profits.
(b) Now, suppose the government imposes a per unit tax t = 2 to
the monopoly. Find the
new price, output and profits. Discuss the impact of that tax.

A monopolist faces an inverse demand curve P(Q)= 115-4Q and
cost curve of C(Q)=Q2-5Q+100.
Calculate industry output, price, consumer surplus, industry
profits, and producer surplus if this firm operated as a
competitive firm and sets price equal to marginal cost.
Calculate the dead weight loss sue to monopoly.

1. Consider a basic monopoly model where: The Inverse demand
p=P(q) & Cost function is c(y).There is a single uniform price
to all consumers.Use algebraic expressions to answer all of the
following for question 1.
a. What is the monopoly’s problem?
b. Given the cost function and the inverse demand equations set
up the first order condition. Solve the first order condition and
outline the monopoly’s pricing rule?
c.The total change in revenue that follows an increase in output
is...

Q1. A monopolist has the following
demand function and marginal cost function P = 120 – Q and MC = 30
+ Q.
i. Derive the monopolist’s marginal revenue function.
ii. Calculate the output the monopolist should produce to
maximize its profit.
ii. (continuation)
iii. What price does the monopolist charge to maximize its
profit?
Now assume that the monopolist above split into two large firms
(Firm A and Firm B) with the same marginal cost as the
monopolist.
Let...

2. Suppose the demand function for a monopolist’s product is
given by: Q = 80 – 5P (Total marks = 5) and the cost function is
given by C = 30 + 2Q + 0.5Q2 A) What is the inverse demand function
for this monopoly? B) Calculate the MC. C) Calculate the MR. D)
Determine the profit-maximizing price. E) Determine the
profit-maximizing quantity. F) How much profit will the monopolist
make? G) What is the value of the consumer surplus...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 26 minutes ago

asked 36 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago