Question

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.

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...

Assume that the manufacturing of barbie doll is a perfectly
competitive industry. The market demand for barbie doll is
described by a linear demand
function :Qd = 6000 – 50P ; P =
price of a barbie doll.
9 There
are fifty manufacturers of barbie dolls. Each manufacturer has the
same
production costs given as TC(q) = 100 +q2 + 10q ; q =
quantity of barbie doll. Show that a firm in this industry maximizes profit by
producingq = (P -10)...

(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...

Suppose demand for apartments in Honolulu is P=6000-0.5q and
supply is P=0.25q.
a. Derive the equilibrium price and quantity for apartments.
Show on a graph. Calculate the producer and consumer surplus.
b. If the city of Honolulu passes a rent control, forcing a rent
(or price) ceiling equal to $1600, what is the quantity supplied,
quantity demanded, and the shortage? Calculate the new consumer
surplus, producer surplus, and deadweight loss, and show these on
your graph.
c. If a black...

Suppose demand for apartments in Honolulu is P=6600-0.5q and
supply is P=0.25q. Derive the equilibrium price and quantity for
apartments. Show on a graph. Calculate the producer and
consumer surplus. If the city of Honolulu passes a rent control,
forcing a rent (or price) ceiling equal to $1800, what is the
quantity supplied, quantity demanded, and the
shortage? Calculate the new consumer surplus, producer
surplus, and deadweight loss, and show these on your graph. If a
black market develops after the rent...

Suppose a monopolist faces the following demand curve: P = 750 –
Q.If the long run marginal cost of production is constant and equal
to $30.
a) What is the monopolist’s profit maximizing level of
output?
b) What price will the profit maximizing monopolist charge?
c) How much profit will the monopolist make if she maximizes her
profit?
d) What would be the value of consumer surplus if the market
were perfectly
competitive?
e) What is the value of the...

Suppose that market demand curve is described by y = 10 - p,
and a Firms cost function is C(y) = 10y - 2y^3/2
(a) Calculate and draw the marginal cost and the average cost
curves.
(b) What is the total surplus maximizing output level? Can it be
a competitive market equilibrium? Why or why not?
(c) Suppose that the Firm is the monopolist. How much does the
monopolist want to produce? What is the market price? How much is...

If the inverse demand curve is P = 120 – 20Q and the marginal
cost is constant at $20, how does charging the monopoly a specific
tax of $10 per unit affect: a. the monopoly’s profit maximizing
level of output, price, and profit, and b. consumer surplus
producer surplus and total welfare (where society’s welfare
includes the tax revenue?

The market for apples is perfectly competitive, with the market
supply curve is given by P = 1/8Q and the market demand curve is
given by P = 40 – 1/2Q.
a. Find the equilibrium price and quantity, and calculate the
resulting consumer surplus and producer surplus. Indicate the
consumer surplus and producer surplus on the demand and supply
diagram.
b. Suppose the government imposes a 10 dollars of sale tax on
the consumer. What will the new market price...

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