Assume Ghacem Limited (Ghacem) continues to enjoy monopoly power over the production and sale of cement products in Ghana and operates with marginal costs of Ghs10 and sells to two sets ofconsumers. It is estimated that each set ofconsumers is made up of20 buyers. The individual demand function for the first set of consumers (A) is given by: QA(P) = 20 - P; and for the second set of consumers (B) it's given as: QB(P) = 16 P; Using the above information estimate market output(s), price(s) and profits for both set of consumers under the following condition(s): 1. If Ghacem cannot prevent arbitrage ii. If Ghacem is able to prevent arbitrage but has no knowledge about the type of consumers it is dealing with. iii. If Ghacem is capable of preventing arbitrage between the different set ofconsumers but not within consumers in the same group. iv. If Ghacem can now identify all its consumers and can prevent arbitrage both between and within groups of consumers.

Assume Ghacem Limited (Ghacem) continues to enjoy monopoly power over the production and sale of cement products in Ghana and operates with marginal costs of Ghs10 and sells to two sets ofconsumers. It is estimated that each set ofconsumers is made up of20 buyers. The individual demand function for the first set of consumers (A) is given by: QA(P) = 20 - P; and for the second set of consumers (B) it's given as: QB(P) = 16 P; Using the above information estimate market output(s), price(s) and profits for both set of consumers under the following condition(s): 1. If Ghacem cannot prevent arbitrage ii. If Ghacem is able to prevent arbitrage but has no knowledge about the type of consumers it is dealing with. iii. If Ghacem is capable of preventing arbitrage between the different set ofconsumers but not within consumers in the same group. iv. If Ghacem can now identify all its consumers and can prevent arbitrage both between and within groups of consumers.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 6E

See similar textbooks

Similar questions

he Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500−500Q�=2,500−500� where Q� is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are per computer and million computers, respectively. The total contribution to profits and fixed costs at this output level is million. Pear Computer is considering an alternative pricing strategy of price skimming. It plans to set the following schedule of prices over the coming two years: Complete the following table by calculating the contribution to profit and overhead for each of the 10 time periods and prices. Time Period Price Quantity Sold Total Contribution ($) (Million)…
The Pear Computer Company just developed a totally revolutionary new personal computer. Pear estimates that it will take competitors at least two years to produce equivalent products. The demand function for the computer is estimated to be P=2,500-500Q where QQ is millions of computers. The marginal (and average variable) cost of producing the computer is $900. Assuming Pear acts as a monopolist in its market, the profit-maximizing price and output levels are $ per computer and million computers, respectively. The total contribution to profits and fixed costs at this output level is $ million. Time Period Price Units sold Total Contri. 1 2,400 2 2,200 3 2,000 4 1,800 5 1,700 6 1,600 7 1,500 8 1,400 9 1,300 10 1,200 Over the 10 periods, the total contribution to profits and fixed costs from price skimming is $…
Suppose a certain city has a monopoly cable-television company. This company has total costs TC = Q2 + 10Q + 75. (Hint: using calculus, this means MC = 2Q + 10 since MC is the derivative of TC with respect to output.) The demand in the community is approximated by the equation Qd = 85 - P/2 (alternatively, you can write the demand equation as Qd = 85 – 0.5P). Graphically depict the demand curve as well as the marginal cost (MC) curve. If the cable company is free to choose its own price Pm and quantity Qm, graphically depict the monopoly equilibrium price and quantity. Add any other curve(s) to your diagram that may be required to obtain this outcome. Compute and state the exact monopolist equilibrium price Pm and quantity Qm that you depicted graphically.
. A monopolist sells two products Q1 and Q2 for which the demand functions are: Q1 = 100 – 3P1 + 2P2 , Q2 = 75+0.5P1 - P2 and the joint cost function is TC = Q1 2 + 2Q1Q2 + Q2 2 . a. Use Cramer’s rule method to find the prices. Solve for the profit maximizing level of output and the maximum profit. b. Use the Hessian to check the second-order condition.
Consider a two-stage context where the incumbent invests in capacity of K1 in stage one. For a demand function of Q = 50 – 0.5P, where Q is the market quantity, P is price, and there is one incumbent and one potential entrant in the market, show how to find the incumbent’s best response function in stage two. Per-unit labour and capital costs equal 20 and fixed costs equal 100 for both firms.
Given the industry demand function X(p) = 100 - 2p, consider the following scenarios: a) The market is a perfectly competitive market. Assume there are identical firms with marginal cost of 12 in this perfectly competitive market. b) The market is dominated by one monopolist with a marginal cost of 12. This monopolist is able to achieve first degree pricing. c) The market is dominated by one monopolist with a marginal cost of 12, but the monopolist is able to achieve only second degree pricing. Assume the menu offers only 2 choices:(Q1= 30; P1= 35), and (Q2= 60; P2= 20). d) The market is dominated by one monopolist with a marginal cost of 12, but the monopolist now uses third degree pricing. Assume the firm can distinguish between low-demand consumers on the weekday and high-demand consumers on the weekend such that Qh = 55 - (1/2)Ph andQl= 45 - (3/2)Pl. The monopolist charges a difference price, Pl and Ph, in each distinct market. e) The market is dominated by one monopolist that is…
Assume you are the Director of Marketing for ABC LTD, a firm that produces a new product called African Light. Your company sells to two distinct geographical markets- Madina and Haatso. ABC LTD is described as a monopolist and has the possibility of discriminating between its Madina and Haatso Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the demand functions for both Madina and Haatso to be: Q1 = 24 – 0.2P1 Madina Q2 = 10 – 0.05P2 Haatso Where Q1 and Q2 are the respective quantities of African Light demanded in the Madina and Haatso markets and P1 and P2 are their respective prices (in GH¢). If the Total Cost (TC) of ABC LTD for producing African Light for these two markets is given as TC = 35 + 40Q, where Q =Q1 +Q2. i. What profit will ABC LTD make with and without price discrimination? ii. What business advice will you give in respect of practicing price discrimination or selling a…
Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is −3. The marginal cost of producing the product is constant at $100, while average total cost at current production levels is $175.Determine your optimal per unit price if:Instructions: Enter your responses rounded to two decimal places.a. you are a monopolist.
Barnacle Industries was awarded a patent over 15 years ago for a unique industrial-strength cleaner that removes barnacles and other particles from the hulls of ships. Thanks to its monopoly position, Barnacle has earned more than $160 million over the past decade. Its customers—spanning the gamut from cruise lines to freighters—use the product because it reduces their fuel bills. The annual (inverse) demand function for Barnacle’s product is given by P = 400 – .0005Q, and Barnacle’s cost function is given by C(Q) = 250Q. Thanks to subsidies stemming from an energy bill passed by Congress nearly two decades ago, Barnacle does not have any fixed costs: The federal government essentially pays for the plant and capital equipment required to make this energy-saving product.Absent this subsidy, Barnacle’s fixed costs would be about $4 million annually. Knowing that the company’s patent will soon expire, Marge, Barnacle’s manager, is concerned that entrants will qualify for the subsidy,…
Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is −2.5. The marginal cost of producing the product is constant at $225, while average total cost at current production levels is $300.Determine your optimal per unit price if:Instructions: Enter your responses rounded to two decimal places.a. you are a monopolist. $ b. you compete against one other firm in a Cournot oligopoly. $ c. you compete against 19 other firms in a Cournot oligopoly. $ 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 large firm has two divisions: an upstream division that is a monopoly supplier of an input whose only market is the downstream division that produces the final output. To produce one unit of the final output, the downstream division requires one unit of the input. If the inverse demand for the final output is P = 1,000 − 80Q, would the company’s value be maximized by paying upstream and downstream divisional managers a percentage of their divisional profits?
Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is -1.5. The marginal cost of producing the product is constant at $125, while average total cost at current production levels is $190.Determine your optimal per unit price if:Instruction: Enter your responses rounded to two decimal places.a. You are a monopolist.$ b. You compete against one other firm in a Cournot oligopoly.$ c. You compete against 19 other firms in a Cournot oligopoly.$