A firm operates two plants whose marginal cost schedules areMC1 = 22.5 + 0.25q1MC2 = 15 +0.25q2It is also a monopoly which can price-discriminate between two markets, A andB, whose demand schedules arePA = 600 – 0.125qAрв 3D 850 — 0.1qвIf it wishes to maximize profits, how much should it produce in each plant, howmuch should it sell in each market, and what prices should it sell at?

Given: Marginal costs for two plants: MC1 = 22.5+0.25q1MC2 = 15+0.25q2 The demand schedule for two…

A firm operates two plants whose marginal cost schedules are MC1 = 22.5 +0.25q1 MC2 = 15+0.25q2 It is also a monopoly which can price-discriminate between two markets, A and B, whose demand schedules are РА 3 600 — 0.125qA рв 3D 850 — 0.1qв If it wishes to maximize profits, how much should it produce in each plant, how much should it sell in each market, and what prices should it sell at?

A firm operates two plants whose marginal cost schedules are MC1 = 22.5 +0.25q1 MC2 = 15+0.25q2 It is also a monopoly which can price-discriminate between two markets, A and B, whose demand schedules are РА 3 600 — 0.125qA рв 3D 850 — 0.1qв If it wishes to maximize profits, how much should it produce in each plant, how much should it sell in each market, and what prices should it sell at?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 32P: Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the...

See similar textbooks

Similar questions

ALCOA does not have the monopoly power it once had. How do you suppose their barriers to entry were weakened?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
Classify the following as a government-enforced barrier to entry, a banker to entry that is not government-enforced, or a situation that does not involve a barrier to entry. A patented invention A popular but easily copied restaurant recipe An industry where economies of scale are very small compared to the size of demand in the market A well-established reputation for slashing prices in response to new entry A well-respected brand name that has been carefully built up over many years
How does the demand curve perceived by a monopolist compare with the market demand curve?
If the transit system were regulated to operate with no subsidy (i.e., at zero economic profit), what approximate output would it supply and what approximate price would it charge?
If public utilities are a natural monopoly, what would be the danger in deregulating them?
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
Why does regulatory capture reduce the persuasiveness of the case for regulating industries for the benefit of consumers?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Classify the following as a government-enforced barrier to entry, a banker to entry that is not government enforced, or a situation that does not involve a barrier to entry. A City passes a law on how many licenses it will issue for taxicabs A city passes a law that all taxicab drivers must pass a driving safety test and have insurance A well-known trademark Owning a spring that offers very pure water An industry where economies of scale are very large compared to the size of demand in the market