Question

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?

Answer #1

D_{R} = P = 3000-0.5Q is the demand faced by the
retailer

D_{w} = MR_{R} = 3000-Q is the marginal revenue
of the retailer and the demand curve faced by the wholesaler

Hence, MR_{W} = 3000-2Q is the marginal revenue faced by
the wholesaler; MC_{W} = 500

Maximising condition for wholesaler's profit

MR_{W} = MC_{W}

3000-2Q=500

or, Q_{w} = 1250 P_{w} = 3000-1250 = 1750 this
is the price paid by the retailer to the wholesaler per unit of
jewellery

Therefore, MC_{R} = 1750+100 = 1850

Maximising condition for the retailer's profit MC_{R} =
MR_{R}

1850= 3000-Q

or, Q_{R} =1150 P_{R} = 3000- 0.5*1150= 2425
(maximising output and prices for the retailer)

If the two firms merge they will face the demand curve P = 3000-0.5Q and marginal revenue curve would be MR = 3000-Q and MC = 500

Profit maximising condition for the merged firm is MC= MR

500 = 3000-Q

or, Q =2500

P = 3000- 0.5* 2500

= 1750

Suppose a monopoly manufacturer sells the good it produces
through a monopoly retailer. The inverse demand curve for the good
at the retail level is given by P = 60 − 5Q. The manufacturer’s
marginal cost is constant at 10, and the retailer’s marginal cost
is w + 10 where w is the wholesale price charged by the
manufacturer. Both firms have no fixed costs
(a) What is the quantity sold by the retailer and what price
does it charge?...

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?

a) A monopoly faces a demand curve given by P = 2,500 - 0.5Q and
has marginal cost constant at $200. What is the profit-maximizing
output level?
b) A monopoly faces a demand curve given by P = 2,500 - 0.5Q and
has marginal cost constant at $100. What is the profit-maximizing
price?

a) A monopoly faces a demand curve given by P = 2,500 - 0.5Q and
has marginal cost constant at $900. What is the profit-maximizing
output level?
b) A monopoly faces a demand curve given by P = 2,500 - 0.5Q and
has marginal cost constant at $1,000. What is the profit-maximizing
price?

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...

Suppose that the market for fruit is characterized by the
inverse demand curve P = 100 − Q. Fruit retailing
is controlled by the monopolist FR Inc., which obtains its fruits
from the monopoly wholesaler FT Inc. at a wholesale price
FR per fruit.
FT Inc. obtains the fruits in turn from the monopoly
manufacturer FI Co. at a manufacturing price of
FF per fruit. FI Co. incurs marginal costs of $10
per unit in making fruit. FR and FT...

A
monopoly has an inverse demand curve given by: p=28-Q
And a constant marginal cost of $4. Calculate deadweight loss
if the monopoly charges the profit-maximizing price.
Round the number to two decimal places.

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 unable to price discriminate
(no reselling), (1) what...

The inverse demand curve a monopoly faces is p equals 15 Upper Q
Superscript negative 0.5. What is the firm's marginal revenue
curve? Marginal revenue (MR) is MRequals 7.5 Upper Q Superscript
negative 0.5. (Properly format your expression using the tools in
the palette. Hover over tools to see keyboard shortcuts. E.g., a
superscript can be created with the ^ character.) The firm's cost
curve is Upper C left parenthesis Upper Q right parenthesis equals
5 Upper Q. What is...

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.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 39 minutes ago

asked 47 minutes ago

asked 47 minutes ago

asked 49 minutes ago

asked 53 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago

asked 4 hours ago