All information given: Computer software S and hardware H are complementary products used to produce computer services. Customers make a one-time purchase of hardware but buy various amounts of software. The market for software is perfectly competitive whereas there is a single monopoly firm, HAL, selling hardware. Demand for software services is given by Q=18-p for a high demand consumer and Q-12-p for a low demand consumer. Suppose that there are 500 high demand consumers and 1000 low demand consumers. The marginal cost of producing software is $2 whereas the marginal cost of producing hardware is $50. (a) What price will HAL set for hardware faced with a perfectly competitive software market? (b) Can HAL do better by branding software and only allowing its hardware to use its own software if it sells software and hardware separately and offers one price for each. (c) Can HAL do better if it offers a different branding and pricing strategy? Suppose that you are a consultant and are asked to provide a strátegy. What would you suggest?

All information given: Computer software S and hardware H are complementary products used to produce computer services. Customers make a one-time purchase of hardware but buy various amounts of software. The market for software is perfectly competitive whereas there is a single monopoly firm, HAL, selling hardware. Demand for software services is given by Q=18-p for a high demand consumer and Q-12-p for a low demand consumer. Suppose that there are 500 high demand consumers and 1000 low demand consumers. The marginal cost of producing software is $2 whereas the marginal cost of producing hardware is $50. (a) What price will HAL set for hardware faced with a perfectly competitive software market? (b) Can HAL do better by branding software and only allowing its hardware to use its own software if it sells software and hardware separately and offers one price for each. (c) Can HAL do better if it offers a different branding and pricing strategy? Suppose that you are a consultant and are asked to provide a strátegy. What would you suggest?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.10P: Inverse elasticity rule Use the first-order condition (Equation 15.2 ) for a Cournot firm to show...

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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.
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
H11. Assume a firm in a competitive market is outputting 500 units and sells each unit for 4 dollars. The average total cost is 3 dollars. What is the total profit? Suppose when a monopoly charges 5 dollars, it sells 2 units of output. When it charges 4 dollars it sells 3 units of output. What is the Marginal Revenue of the 4th output?
Draw the demand curve, marginal revenue, and marginal cost curves from Figure : , and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose the demand for the monopoly’s product increases dramatically. Draw the new demand curve. 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. What do you think about the result? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
a) With the aid of a diagram, explain how an ordinary monopoly that sells its output at a uniform price, having a total cost function TC=c•Q (where c,0), could earn total revenue that equal the entire area under the market demand curve, leaving customers with no consumer surplus. b) If an ordinary monopoly firm could indeed capture the entire consumer surplus, with the aid of a diagram, indicate graphically the firm’s output and the uniform price at which the firm would sell its product in order to maximize profit.
Assume the following equations describe the conditions for a monopoly: Qd = 2,000 - 100P TC = 3,500 + 5q + .005q2 Where Qd is the quantity demanded, P is the commodity's price in dollars, TC is the firm's total cost in dollars and q is the quantity of output produced. Based upon these equations, answer the following questions: a. What is the firm's equation for total revenue expressed as a function of quantity? b. What is the firm's equation for marginal revenue expressed as a function of quantity? What is the firm's equation for marginal cost expressed as a function of quantity? c. What is the firm's profit maximizing quantity of output? d. What price will the firm charge for the commodity? e. What would be the socially optimal quantity of output? f. What price would regulators have to establish in order to have the firm produce the socially optimal quantity of output?
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.Refer to Figure 15-16. Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit maximizing owners. If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged? Q3 units; P3 Q1 units; P1 Q4 units; P4 Q1 units; P4 Suivant
Suppose a monopoly can sell 1 unit for $20, or 2 units for $15 each. What is the marginal revenue of the 2nd unit? Question 9 options: $10 $0 $20, as this is the price when selling one unit $15 as this is the price when selling 2 units
1. Two firms compete in a market to sell a homogeneous product with inverse demand function P = 960-6Q. Each firm produces at a constant marginal cost of $60 and has no fixed costs. a.Assuming the firms collude and act as a monopolist, computei. Equilibrium price and quantityii. Total profitsiii. Consumer surplusiv. Total welfare loss relative to perfect competition (if any) b. Assuming perfect competition, computei. Equilibrium price and quantityii. Profits and producer surplusiii. Consumer surplus and total surplus
The cost function for producing ethanol from municipal waste (wastehol) is 1000+10q2 where q is in millions/gallons per year. The demand for wastehol is currently perfectly inelastic at 5 million gallons per year. Assume that producers of wastehol are perfectly competitive. California is deciding whether to convert all wastehol producers into a regulated wastehol utility. If wastehol is a regulated monopoly utility with the cost function above, what price would regulators set as the price of wastehol? Now assume that the wasteahol market has boomed and demand has grown to 20 (again million gallons per year). Now what is the regulated price of wastehol? You are the wastehol producer and are trying to decide whther to lobby for deregulating the wastehol industry. If wastehol were deregulated, if demand remains 20, what would the perfectly competitive price be? If you are a wastehol customer, you would prefer a deregulated industry if demand were 20? True/False?
can some one help me with this question? The monopoly cost function is given TC = 500 + 12 × Q + 0.5 × Q^2 and the demand function for the products of this monopoly in two markets: Q1 = 400 - 2 × P1, Q2 = 1250 - 5 × P2. There are no other sales markets. Find the volumes of sales and prices in each of the two markets at which the total profit of the monopoly will be maximized.
Consider a natural monopoly with large fixed costs and a constant marginal cost of production, such as supplying water to household. Which condition can be used to regulate such a natural monopoly to ensure that the firm continues to operate while maximizing consumer surplus? Question 23Answer a. Demand = Average Cost b. Demand = Marginal Cost c. Marginal Cost = Marginal Revenue d. Price = Marginal Cost e. Price = Marginal Revenue