Pennybags is the only seller of board gam Atlant ity, New Jersey. The inverse demand curve for board games is given by: P = 40 – 0.5q where q is in hundreds of games per month. Rich Uncle Pennybags' marginal cost of producing board games is: MC = 7+0.1q . How much surplus will buyers receive from a perfectly price discriminating Uncle Pennybags, and how much producer surplus will Uncle Pennybags capture? Then, calculate what the deadweight loss due to monopoly will be.

Pennybags is the only seller of board gam Atlant ity, New Jersey. The inverse demand curve for board games is given by: P = 40 – 0.5q where q is in hundreds of games per month. Rich Uncle Pennybags' marginal cost of producing board games is: MC = 7+0.1q . How much surplus will buyers receive from a perfectly price discriminating Uncle Pennybags, and how much producer surplus will Uncle Pennybags capture? Then, calculate what the deadweight loss due to monopoly will be.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

See similar textbooks

Similar questions

Can you think of any examples of successful predatory pricing in the real world?
Some years ago. two intercity bus companies, Greyhound Lines, Inc. and Trailways Transportation System, wanted to merge. One possible definition of the market for this case was the market for intercity bus service. Another possible definition was the market for intercity transportation, including personal cars, car rentals, passenger trains, and commuter air flights.' Which definition do you think the bus companies preferred, and why?
Assume the daily demand curve for Potato is given by Demand: Q = 1500 − 15P where, QD demand in kilos per day and P is price per kilos. The long-run supply curve for Potato is given by Q = 12P − 1201. What is the long-run equilibrium Price and Quantity?2. Based on your answers in (1), what is consumer surplus at this equilibrium? What isproducer surplus at this equilibrium?3. Graph your results
Suppose a perfectly competitive market for hotdog stands in New York City becomes monopolistically competitive when gourmet, discount, andethnic hot-dog retailers show up, making eachcart slightly different. If hot dogs from differentstands are now imperfect substitutes and there arenumerous carts in the city, compare the producerand consumer surplus and total social welfarebefore and after the change
Figure 15-11In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable television market in Upstate New York.Refer to Figure 15-11. Following the entry of Verizon, the subscription price falls from PM to PC. What is the increase in consumer surplus as a result of this change? Choix de groupe de réponses the area A + B + C the area D + F the area B + C the area B + C + D
Draw an example of a monopoly with a linear demand curve and a constant marginal cost curve. a. Show the profit-maximizing price and output and and identify the areas of consumer surplus, producer surplus, and deadweight loss. Also show the quantity that would be produced if the monopoly were to act like a price taker. b. Now suppose that the demand curve is a smooth concave-to-the-origin curve (whose ends hit the axes) that is tangent to the original demand curve at the point Explain why the monopoly equilibrium will be the same as with the linear demand curve. Show how much output the firm would produce if it acted like a price taker. Show how the welfare areas change. c. Repeat the exercises in part b if the demand curve is a smooth convex-to-the-origin curve (whose ends hit the axes) that is tangent to the original demand curve at the point
Assume that the demand for electric cars is p = 100-q (where q is the quantity and p is the price), and that an innovation can reduce the constant marginal cost of production from 70 to 60. What is the definition of nondrastic/drastic innovation? Confirm that the innovation for electric cars is nondrastic. Show that marginalcost would have to be reduced to less than 40 for theinnovation to bedrastic. Suppose that the industry is a monopoly (not threatened by entry). Howmuch is this firm willing to pay to acquire the innovation?
For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. (a) Draw a large graph showing the Royal Mail’s average cost curve and itsmarginal cost curve. Show how many deliveries would be made, and at whatprice, if Royal Mail operated as a monopoly. Show the Royal Mail’s profit orloss on the graph.
For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. The government makes a law restricting the price of postage to £1. Show theeffect of this policy in the short-run in a new, large graph. The graph shouldshow the firm’s average cost, marginal cost, marginal revenue, and consumerdemand. How much postage is bought? Show on your graph if the Royal Mailis in profit or loss, and by how much.
For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. New technology changes delivery firms’ technology. Now, the minimumaverage cost is £2 at 1 million deliveries and a minimum marginal cost of £1at 0.75 million deliveries. The government removes all price restrictions andallows free entry. Describe the long-term outcome for this market, using twographs, one at the firm-level and one at the…
For many decades, the Royal Mail had a legal monopoly in the U.K. Companies in thepostal business have increasing returns to scale, then constant returns to scale, andthen decreasing returns to scale. The Royal Mail’s minimum average cost is £2 at 100million deliveries and its minimum marginal cost is £1 at 75 million deliveries.The demand for postage is zero at a price of £10, and demand is 300 milliondeliveries at a price of £0. Marginal revenue is zero at a price of £10 and 150 at aprice of £0.Note: Unless otherwise stated, the numerical answers in this question do not need tobe exact but should correspond to how you have drawn your graph. (a) Draw a large graph showing the Royal Mail’s average cost curve and itsmarginal cost curve. Show how many deliveries would be made, and at whatprice, if Royal Mail operated as a monopoly. Show the Royal Mail’s profit orloss on the graph. (b) The government makes a law restricting the price of postage to £1. Show theeffect of this policy in the…
Alice is the monopoly producer for cosmetics in Wonderland. Marketdemand for cosmetics is given by p = 500 − 4Q and Alice’s costsof production are C(q) = 16q. Please calculate the monopoly price,quantity and profits. What would be the fair market price in perfectcompetition? Also calculate the welfare loss which occurs due to themonopoly