Question

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 firm has the ability to practice perfect price discrimination, what is the firm’s output?

d) If the firm practices perfect price discrimination, what are the levels of consumer and producer surplus? What is the deadweight loss from market power? Both compute and illustrate each on a graph.

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?

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...

Suppose the doll company American Girl has a demand curve of P =
150 – 0.25Q. The marginal cost is given by MC = 10 + 0.50Q. A)
Calculate consumer surplus and producer surplus at the profit
maximizing level of output. B) Calculate deadweight loss at the
profit maximizing level of output. C) Calculate consumer surplus,
producer surplus, and deadweight loss at the efficient level of
output.

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.

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?

1. Suppose a monopolist faces an inverse demand function of P =
150 ? 2Q. The firm’s cost functions is 30Q.
(a) What is the firm’s marginal cost? Average cost? How about
the firm’s marginal revenue?
(b) What would the firm charge if they were a single price
monopolist?
(c) What is the consumer surplus, producer surplus, and dead
weight loss.
(d) Suppose the monopolist is able to perfectly price
descriminate, what are the consumer surplus, producer surplus, and
dead...

A single firm produces widgets, with a cost function and inverse
demand function as follows,
C(q) = 150 + 2q P(Qd) = 10 ? 0.08Qd
(a) Calculate the monopolist’s profit-maximizing price,
quantity, and profit if he can charge a single price in the market
(single price monopolist).
(b) Suppose the firm can sell units after your answer to (a) at
a lower price (2nd-degree price discrimination, timed-release).
What quantity will be sold for what price in this second-tier
market? Calculate...

2. (10+10+6) Suppose you have the
following data:
Market demand is
P =
200 – 5Q
Total Cost Function is
TC = 150 + 6Q+ 2Q2
a) If this market has only one firm
(monopoly), compute the quantity, price and profit of this firm.
Compute PS.
b) If this market had many firms
(Perfect Competition), compute competitive market output, price,
and profit. Compute TS.
c). Illustrate your answers in (a) and
(b) on the same graph. Your graph...

2. (10+10+6) Suppose you have the
following data:
Market demand is
P =
200 – 5Q
Total Cost Function is
TC = 150 + 6Q+ 2Q2
a) If this market has only one firm
(monopoly), compute the quantity, price and profit of this firm.
Compute PS.
b) If this market had many firms
(Perfect Competition), compute competitive market output, price,
and profit. Compute TS.
c). Illustrate your answers in (a) and
(b) on the same graph. Your graph...

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...

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