Question

2. The market for air conditioners has: Total Cost: TC = 20 + 10Q +(3/4)Q2 Marginal Cost: MC = 10 + (3/2)Q Marginal Revenue: MR = 1,010 – 0.5Q Demand: Q = 4,040 – 4P

2a. If a monopoly controls the market, calculate the equilibrium price and quantity of air conditioners.

2b. Calculate the monopoly profits from part a.

2c. If the government imposed a tax of $80 per air conditioner that the monopoly sells, calculate the equilibrium new price and quantity of air conditioners and the government tax revenue.

2d. Calculate the monopoly profits from part c.

2e. Calculate the minimum tax that the government could charge to make the monopoly produce no output.

Answer #1

Consider a total cost function of TC = 0.5Q^2 +10Q + 20 and the
market demand function Q=70-p.
a What is the profit-maximizing output and price for the perfect
competition? Calculate its profit.
b What is the profit-maximizing output and price for the
monopolist? Calculate its profit.
c What is the profit-maximizing output and price for the
monopolist in the second market? Calculate its profit.

2. The market for a good has an inverse demand curve of p = 40 –
Q and the costs of producing the good are defined by the following
total cost function: TC = 100 + 1.5Q2.
a. If this good is produced in a monopoly market, provide a
graph of the demand curve, marginal revenue curve and marginal cost
curve. Then calculate the equilibrium output and price .
b. Calculate the price elasticity of demand at the equilibrium
price...

a. Each of the 10 firms in a competitive market has a cost
function of C = 25 + q^2. The market demand function is Q = 120 -
p. Determine the equilibrium price, quantity per firm, and market
quantity.
b. Given the information in part a, what effect does a specific tax
of $2.40 per unit have on the equilibrium price and quantities?
Suppose that market demand for a good is Q = 480 - 2p. The
marginal cost...

(i) A monopolist has the following total cost function:
C=50+10Q+0.5Q2
They face the market demand of: P= 210-2Q
a. What is the profit maximizing price and quantity set by
this monopoly? What is the monopolist's profit?
b. Calculate the producer surplus, consumer surplus, and
deadweight loss.
c. If the price elasticity of demand faced by this
monopolist at the equilibrium is -1.625, what is the Lerner
Index?
d. If the price elasticity of demand faced by this
monopolist at the...

3. (i) A monopolist faces the following demand and total cost
functions: Q1 = 65 -1/2P, TC = Q2 + 10Q + 50
(a) Calculate the profit maximizing output and price of the
monopolist. Calculate the resulting profit. (12 points)
(b) Suppose the government imposes an excise tax of $30 on the
production and sale of the product. Calculate the resulting optimal
profit maximizing output and price for the monopolist. Also
determine the level of profit. (12 points)
(c) If...

Assume that consumers view tax preparation services as
undifferentiated among producers, and that there are hundreds of
companies offering tax preparation in a given market. The current
market equilibrium price is $120. Jojo’s Tax Service has a daily,
short-run total cost given by TC = 100 + 4Q2. Answer the
following questions:
How many tax returns should Jojo prepare each day if her goal is
to maximize profits?
How much will she earn in profit each day?
A perfectly competitive...

Assume that consumers view tax preparation services as
undifferentiated among producers, and that there are hundreds of
companies offering tax preparation in a given market. The current
market equilibrium price is $120. Jojo’s Tax Service has a daily,
short-run total cost given by TC = 100 + 4Q2. Answer the
following questions:
How many tax returns should Jojo prepare each day if her goal is
to maximize profits?
How much will she earn in profit each day?
A perfectly competitive...

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