Please explain the relation between the price and the substitutability of the products in a multi product monopoly with interdependent demand functions.
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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.ou are the manager of a monopoly, and your analysts have estimated your demand and cost functions as P = 200 − 2Q and C(Q) = 1,000 + 3Q2, respectively. a. What price–quantity combination maximizes your firm’s profits? Instructions: Round your response to the nearest penny (two decimal places). Price: $ Quantity: units b. Calculate the maximum profits. Instructions: Round your response to the nearest penny (two decimal places). $ c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price–quantity combination? multiple choice 1 Elastic Unit elastic Inelastic d. What price–quantity combination maximizes revenue? Instructions: Round your response to the nearest penny (two decimal places). Price: $ Quantity: units e. Calculate the maximum revenues. Instructions: Round your response to the nearest penny (two decimal places). $ f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price–quantity…You are the manager of a monopoly, and your analysts have estimated your demand and cost functionsas P = 300 − 3Q and C(Q) = 2, 000 + 2Q2, respectively.(a) What price-quantity combination maximizes your firm’s profits?(b) Calculate the maximum profits.(c) Is demand elastic, inelastic, or unit elastic at the profit maximizing price-quantity combination?(d) What price-quantity combination maximizes revenue?(e) Calculate the maximum revenues.(f) Is demand elastic, inelastic, or unit elastic at the revenue maximizing price-quantity combination?
- The cost function for producing ethanol from municipal waste (wastehol) is 1000+10q2where 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?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.Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact on income transfers. Since both monopolists and competitive firms follow the MC = MR rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference?
- (ONLY PART D) You are the manager for a monopoly with costs, demand, and marginal revenue as in the graph at the top on Figure 1. a. Does the fact that you operate in a monopoly always guarantee that you can achieve higher profits by increasing the price? b. Draw the area representing the profits on the top graph on Figure c. Suppose one of your suppliers just announced an increase in prices for a specific part that your product requires. What should the impact be to each of the curves on the top graph of Figure 1? Explain d. Suppose economic conditions change in such a way that the demand curve for your company shifts Draw a demand curve on the bottom graph on Figure 1 that leads to zero economic profits. Draw a demand curve on the bottom graph on Figure 1 such that any further leftward demand shift will cause you to shut down.You are the manager of a monopoly, and your analysts have estimated your demand and cost functions as P = 300 − 3Q and C(Q) = 1,500 + 2Q2, respectively. a. What price-quantity combination maximizes your firm’s profits? Price: Quantity: b. Calculate the maximum profits. $ c. Is demand elastic, inelastic unit elastic Elastic d. What price-quantity combination maximizes revenue? Price: Quantity: e. Calculate the maximum revenues. $ f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price-quantity combination? multiple choice Elastic Unit elastic InelasticYou are the manager of a monopoly, and your analysts have estimated your demand and cost functions as P = 200 − 2Q and C(Q) = 1,000 + 3Q2, respectively. a. What price–quantity combination maximizes your firm’s profits? Instructions: Round your response to the nearest penny (two decimal places). Price: $ Quantity: units b. Calculate the maximum profits. Instructions: Round your response to the nearest penny (two decimal places). $ c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price–quantity combination? multiple choice 1 Elastic Unit elastic Inelastic d. What price–quantity combination maximizes revenue? Instructions: Round your response to the nearest penny (two decimal places). Price: $ Quantity: units e. Calculate the maximum revenues. Instructions: Round your response to the nearest penny (two decimal places). $ f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price–quantity…
- Enrodes is a monopoly provider of residential electricity in a region of northern Michigan. Total demand by its 3 million households is Qd = 1,500 − 2P, and Enrodes can produce electricity at a constant marginal cost of $4 per megawatt-hour. Consumers in this region of Michigan have recently complained that Enrodes is charging too much for its services. In fact, a few consumers are so upset that they are trying to form a coalition to lobby the local government to regulate the price Enrodes charges. If all the consumers of this region joined the coalition against Enrodes, how much would each consumer be willing to spend to lobby the local government to regulate Enrodes’s price? Do you think the consumers will be successful in their efforts? Explain.2.1 Graphically illustrate and explain the monopolist’s output decision. 2.2 The ultimate determinant of monopoly power is the firm’s elasticity of demand. What three factors determine a firm’s elasticity of demand? Explain this in the context of a South African example of a monopoly. 2.3 What is meant by the term “monopsony power”? What are some sources of monopsony power? What determines the amount of monopsony power an individual firm is likely to have?
