A monopolistic firm sells into two markets. The two inverse demand curves are p, = 12 - q, and p, = 12-29,. Assume that the firm cannot charge different prices in the two markets. Then its total revenue will be Oa (24- 3P)P Оь. 48- 3Q Oc (12 - P)3, O d.(24- 3Q)Q
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- Inverse elasticity rule Use the first-order condition (Equation 15.2 ) for a Cournot firm to show that the usual inverse elasticity rule from Chapter 11 holds under Cournot competition (where the elasticity is associated with an individual firm's residual demand, the demand left after all rivals sell their output on the market). Manipulate Equation 15.2 in a different way to obtain an equivalent version of the inverse elasticity rule: pMCp=sieQ,p , where si=qi/Q is firm i's market share and eQp is the elasticity of market demand. Compare this version of the inverse elasticity rule with that for a monopolist from the previous chapter.A monopolistic company has to spend exactly $3000 as total cost for the production of a number of Basic Science and Mathematics textbooks for three schools. The Basic Science textbook sells at P1 = 455 – Q1 – Q2 and the Mathematics textbook at P2 = 910 – Q1 – 4Q2 where P1 and P2 denote the prices; Q1 and Q2 denote the number of Basic science and mathematics textbooks produced respectively. The joint cost of producing these textbooks is given as TC = 5Q1 + 10Q2(i) Find the maximum profit the producer can make(ii) Estimate the new profit if the company decides to reduce the total costby $50 (Assume that 2nd order conditions are satisfied) Question 2A monopolistic producer of two goods, G1 and G2, has a joint total cost function as ?? = 10?1 + 4?1?2 + 5?2Where Q1 and Q2 denote the quantities of G1 and G2 respective. If P1 and P2denote corresponding prices then the demand equations are P1 =50–1.5Q1 +Q2P2 =52.5+Q1 –1.5Q2(a) Find the total revenue function for the monopolist(b) Find the…Q31 Plaex Building Systems Inc., a startup firm based in Hampstead, New Brunswick, is monopolistic firm with a sales schedule such that it can sell 22 prefabricated platics garages per week at $1,950 each, but if it restricts its output to 21 per week it can sell these at $2,000 each. The marginal revenue of the 22nd unit of sales per week is Multiple Choice $42,900. $1,950. $900. $432. $2,000.
- Consider a mature maket with a demand given by P=105.4-10Q The cost of production is given by C=10Q For many years this market has been served by a monopolist. How much profit would the firm lose if it is forced to behave as a competitive firm In all your calculations use numbers with 4 decimal places.Only typed answer and don't use chatgpt otherwise I will downvote the answer Reference: Ref 11-2 (Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC'. Suppose further that after the innovation reduced the cost to ATC', it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be: a. $1,190. b. $3,400. c. $1,700. d . $3,060.Management of McPablo’s Food Shops has completed a study of weekly demand for its “old-fashioned” tacos in 53 regional markets. The study revealed that Q = 400 -1,200P + .8A + 55Pop + 800P° where Q is the number of tacos sold per store per week, A is the level of local advertising expenditure (in pesos), Pop denotes the local population (in thousands), and P0 is the average taco price of local competitors. For the typical McPablo’s outlet: P = Php1.50, A = Php1,000, Pop = 40, and P0 = Php1.00. Estimate the weekly sales for the typical McPablo’s outlet. What is the current price elasticity for tacos? What is the advertising elasticity? Should McPablo’s raise its taco prices? Why or why not?
- There are two ice-cream parols on a beach. The dayly demand for ice-creams is given by Q = 3079 - 3p. The average variable cost of an ice-cream is 70, while the rent of the place is 966. How many ice-creams is the 'Leader' company selling if the two ice-cream stands operate as Stackelberg duopolists? (Please use 2 decimals in your answer.)Assume a monopolist produces rum and knows there are two groups of rum consumers, 1 and 2, with different price elasticities. Group 1 is highly price elastic with E1=-10; Group 2 exhibits a lower price elasticity of E2=-2.5. Assume the company can separate these two groups (e.g., by handing out special ID cards) and can charge two different prices. If P2=$14, how much can it charge to Group 1?A nightclub manager realizes that demand for drinks is more elastic among students, and is trying to determine the optimal pricing schedule. Specififically, he estimates the following average demands: • Under 25: qr= 18 − 5p • Over 25: q = 10 − 2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the nightclub $2 each. (a) If the market cannot be segmented, what is the uniform monopoly price? (b) If the nightclub can charge according to whether or not the customer is a student but is limited to linear pricing, what price (per drink) should be set for each group? (c) If the nightclub can set a separate cover charge and price per drink for each group, what two-part pricing schemes should it choose? (d) Now suppose that it is impossible to distinguish between types. If the nightclub lowered drink prices to $2 and still wanted to attract both types of consumers, what cover charge would it set? (e) Suppose that the nightclub again restricts itself…
- There are two ice-cream parols on a beach. The dayly demand for ice-creams is given by Q = 3252 - 7p. The average variable cost of an ice-cream is 83 while the rent of the place is 576. How many ice-creams is one company selling if the two ice-cream stands operate as Cournot duopolists? (Please use 2 decimals in your answer.)Baker Enterprises operates a midsized company that specializes in the production of a unique type of memory chip. It is currently the only firm in the market, and it earns $10 million per year by charging the monopoly price of $115 per chip. Baker is concerned that a new firm might soon attempt to clone its product. If successful, this would reduce Baker’s profit to $4 million per year. Estimates indicate that, if Baker increases its output to 280,000 units (which would lower its price to $100 per chip), the entrant will stay out of the market and Baker will earn profits of $8 million per year for the indefinite future. 1. What must Baker do to credibly deter entry by limit pricing? 2. Does it make sense for Baker to limit price if the interest rate is 10 percent?You are employed at a monopolistic company as a research (pricing) economist and you are deriving the behavior of two markets based on demand curves given by:D1(p1) = 50 - p1D2(p2) = 50 - 2p2 Assume that the marginal cost is constant at $8 a unit. (a) If it can price discriminate, what price should it charge in each market in order to maximize profits?(b) If it can’t price discriminate, what price should it charge?
