Suppose a monopoly firm has an annual demand function of Qd = 20,000 - 250P, annual variable costs of VC = 16Q + 0.002Q2 and marginal cost of MC = 16 + 0.004Q, where Q is the annual quantity of output. In addition, the firm has an avoidable fixed cost of $25,000 per year. If this firm maximizes its profit, what is the value of the consumer surplus in the market
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- Assume a monopoly has two groups of customers, and each group of customers has different demand for the firm's product. Group A's demand is: Pa = 90 - .1qa where qa is group A's quantity demanded and Pa is the commodity's price in dollars for group A customers. Group B's demand is: Pb = 170 - .2qb where qb is group B's quantity demanded and Pb is the commodity's price in dollars for group B customers. The firm's total cost curve is: TC = 30,000 + .05q2 where TC is the firm's total cost in dollars and q is the total quantity of output produced by the firm. Based upon the above equations, answer the following questions: a. What quantity of the commodity would the firm sell to customers in group B? What price would the firm establish for customers in group B? b. What quantity of the commodity would the firm sell to customers in group A? What price would the firm establish for customers in group A?In this problem, p and C are in dollars and x is the number of units. A monopoly has a total cost function C = 1,000 + 54x + 18x2 for its product, which has demand function p = 162 − 3x − 2x2. Find the consumer's surplus (in dollars) at the point where the monopoly has maximum profit. (Round your answer to the nearest cent.)A monopolist in a given market faces inverse demand function P = 90 – 2 Q. Its cost structure is given by C(Q) = 10 Q + F, where F represents a set-up cost that the firm only pays if it decides to produce and sell in this market. Solve this firm’s profit maximization problem and determine the following: The deadweight loss in the market as a proportion of profits, assuming that F = 300 instead: 0.25 0.8 1 0.75
- Currently there is an incumbent monopoly in a market. Next year, a potential entrant may enter the market. Suppose that the potential entrant first makes a decision to either ‘enter’ or ‘not enter’ the market. If the potential entrant chooses ‘enter’, then the incumbent can choose to either ‘lobby’ or ‘not lobby’ the government to impose a tax on the potential entrant. If the incumbent chooses to ‘lobby’ then this imposes a cost on it of 20 dollars, but as a result, the government passes a law that places a tax of 60 dollars on the potential entrant if it chooses to enter the market. If the potential entrant chooses to not enter the market it makes zero profit, and the incumbent firm makes the monopoly profit equal to 100 dollars. If the potential entrant enters the market and the incumbent chooses not to lobby, then both firms earns the duopoly profit of 50 dollars. If the potential entrant enters the market, and the incumbent chooses to lobby, the potential entrant earns the…Currently there is an incumbent monopoly in a market. Next year, a potential entrant may enter the market. Suppose that the potential entrant first makes a decision to either ‘enter’ or ‘not enter’ the market. If the potential entrant chooses ‘enter’, then the incumbent can choose to either ‘lobby’ or ‘not lobby’ the government to impose a tax on the potential entrant. If the incumbent chooses to ‘lobby’ then this imposes a cost on it of 20 dollars, but as a result, the government passes a law that places a tax of 60 dollars on the potential entrant if it chooses to enter the market. If the potential entrant chooses to not enter the market it makes zero profit, and the incumbent firm makes the monopoly profit equal to 100 dollars. If the potential entrant enters the market and the incumbent chooses not to lobby, then both firms earns the duopoly profit of 50 dollars. If the potential entrant enters the market, and the incumbent chooses to lobby, the potential entrant earns the…A monopoly firm faces a market demand p(Q) = 100 – Q, where Q is output. Marginal cost is 2Q and marginal revenue is 100 – 2Q. If a competitive industry, serving the same market as the monopolist, has a marginal cost of MC(Q) = Q, then a. average cost pricing generates maximum welfare b. antitrust action against the monopolist would generate the same welfare as maximum price setting at marginal cost for the existing monopoly c. antitrust action against the monopolist would generate less welfare than maximum price setting at marginal cost for the existing monopoly d. antitrust action against the monopolist would generate more welfare than maximum price setting at marginal cost for the existing monopoly
- Each consumer has the following demand for annual visits to Planet Fitness: Q = 200 - P (or P = 200 - Q), where Q is the number of visits to Planet Fitness per year and P is the price per visit. In western Maryland, Planet Fitness has a monopoly on the gym market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that Planet Fitness could charge each customer? Annual fee = $18,050; P = $0 for each visit. Annual fee = $20,000; P = $0 for each visit. Annual fee = $18,050; P = $10 for each visit. Annual fee = $20,000; P = $10 for each visit.Each consumer has the following demand for annual visits to a park is: Q = 100 - P, where Q is the number of visits to the park per year and P is the price per visit. In Kentucky, this particular park has a monopoly on the park market in the area. If the marginal cost of serving each customer is $10 per visit, what is the optimal two-part tariff that this park could charge each customer? Answer OptionsAnnual Fee = $4050; P= $10 for each visit Annual Fee = $4050; P= $0 for each visit Annual Fee = $5000; P= $10 for each visitAnnual Fee = $5000; P= $0 for each visitQuestion 27 Consider a monopoly market in which the market demand curve is given by P = 240 – 2Q, the marginal revenue curve is MR = 240 – 4Q, the marginal cost curve is MC = 2Q, and there are zero fixed costs. Suppose the government intervenes and turns the market into a competitive market, and all the firms in the market have the same marginal cost curve as the monopolist, MC = 2Q, and zero fixed costs. How much is the resulting gain in total surplus? 300 800 400 600
- 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.Consider two groups of consumers. In the first group, each consumer has the inverse demand function P = 50 – Q. In the second group, each consumer has the inverse demand function P = 30 – Q. There are 10 consumers in each group, or 20 consumers in all. Marginal cost is always zero. The monopolist wants to maximize profits by designing a two-part tariff that will apply to both groups. (1) After paying the tariff, how much consumer surplus remains to a member of Group I? Of Group II? (2) Suppose that Q is a normal good. Compare the consumer surplus remaining for a member of Group I to the surplus remaining for a member of Group II. How might two-part tariffs affect the equality of the income distribution?Consider a monopoly market in which the market demand curve is given by P = 240 – 2Q, the marginal revenue curve is MR = 240 – 4Q, the marginal cost curve is MC = 2Q, and there are zero fixed costs. Suppose the government intervenes and turns the market into a competitive market, and all the firms in the market have the same marginal cost curve as the monopolist, MC = 2Q, and zero fixed costs. How much is the resulting gain in total surplus?[12:17]800 600 300 400