Suppose the inverse demand for a product is P(Q) 30-2Q. This implies that the marginal revenue is MR(Q) =30-4Q. The total cost of production is C(Q) =20+Q?, which implies that the marginal cost is MC(Q) =2Q. The deadweight loss from monopoly power in this market is O A) 7.5 O B) 50 OC) 25 D) 10
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- You own a private parking lot near City University with a capacity of 600 cars. The demand for parking at this lot is estimated to be Q=1,000 - 2P, where Q is the number of customers with monthly parking passes and P is the monthly parking fee per car. 1)Derive your marginal revenue schedule. 2) What price generates the greatest revenues? Your fixed costs of operating the parking lot, such as the monthly lease paid to the landlord are £25,000 per month. In addition, your insurance company charges you £20 per car per month for liability coverage and the City of London charges you £30 per car per month as part of its policy to discourage the use of private cars in the city center. 3)What is your profit maximizing price?A10. The demand function for a firm's domestic and foreign markets are: AT) (5.4) P¡ = 50 - 401 Pa=40- 5Q2 and the total cost function is: TC= 25 + 120, where Q = Qi + Q. a/ Determine the prices needed to maximize profit with and without price discrimination; b/ Find the maximum profit values in these two cases and give your comment.Suppose two firms face market demand of P=150-Q, where . Both firms have the same unit cost of C, which consist of your student number a plus 20 (i.e. if your student number a=3, then cost C=20+3=23). Assume the firms compete a la Stackelberg. Firm 1 is the leader and Firm 2 is the follower in this market. What is the follower’s total revenue function? Determine the equilibrium output level for both the leader and the follower. Determine the equilibrium market price. Determine the profits of the leader and the follower.
- The Johnson Robot Company’s marketing managers estimate that the demand curve for the company’s robots in 2008 is P = 3,000 - 40Q where P is the price of a robot and Q is the number sold per month. If the firm wants to maximize its dollar sales volume, what price should it charge? a. $3000 b. $1000 c. $1500 d. $750Bavarian Crystal Works designs and produces crystal wine decanters for export to international markets. The marketing manager of Bavarian Crystal Works estimates the demand curve for each month to be: P=1,000-0.0025Q where Q is the number of wine decanters produced annually. Bavarian Crystal Works also pays a lease for its factory and equipment every month in the amount of $1,000,000. Finally, the cost to produce each wine decanter is $200. What is the marginal revenue at 40,000 units? If Bavarian Crystals is currently producing 40,000 units would you recommend they increase their production?Alchem (L) is the price leader in the polyglue market. All 10 other manufacturers(follower [F] firms) sell polyglue at the same price as Alchem. Alchem allows theother firms to sell as much as they wish at the established price and supplies theremainder of the demand itself. Total demand for polyglue is given by the followingfunction (QT = QL + QF):P ¼ 20;000 4QTAlchem’s marginal cost function for manufacturing and selling polyglue isMCL ¼ 5;000 þ 5QLThe aggregate marginal cost function for the other manufacturers of polyglue isΣMCF ¼ 2;000 þ 4QFa. To maximize profits, how much polyglue should Alchem produce and what priceshould it charge?b. What is the total market demand for polyglue at the price established by Alchemin Part (a)? How much of total demand do the follower firms supply?
- Recently, the major firms in the United States cigarette industry joined with the government in a settlement of liability claims. Under the tentative agreement, the industry would curb advertising and pay the equivalent of about $15 billion per year (for smoking-related state Medicaid expenses) in exchange for protection against smoker lawsuits.a) Before the settlement, a leading cigarette manufacturer estimated its marginal cost at $1.00 per pack and its elasticity of demand at -2. What is its optimal price? The firm’s share of the industry payment (based on its historic market share) will raise its average total cost per pack by $.60. What effect will this have on its optimal price?b) A marketing manager suggests that the firm should offer price discounts to the company’s long-term, older, most-loyal (addicted?) customers. Do you agree? Explain carefully.c) In the past, anti-smoking information campaigns have had some limited success in reducing smoking. What price reaction (if any)…An economist was trying to understand the relation between price, Marginal Revenueand Marginal cost in Monopoly and Perfect Competition. Determine equilibrium priceand output in the long run under Monopoly and Perfect Competition if the marketdemand curve is given as QD=500-2P and Marginal cost is Rs 50. Also comment onthe values obtained in the case of Monopoly and Perfect Competitionfunctions are given as below Q_1=1200-10P_1Q_2=800-10P_2Where Q_1 is the domestic quantity: Q_2 is the foreign quantity P_1 is the domestic price/unit P_2 is the domestic price/unitThe firms total cost function is given by; TC=0.05Q^2+10,000Required.Determine the price and quantities that maximize the firm’s profits .What is the maximum profit for the firm? Compute the price elasticities of demand in both the domestic and foreign market.
- Suppose two firms face market demand of P=130-Q, Both firms have the same unit cost of 30. Assume the firms compete a la Stackelberg. Firm 1 is the leader and Firm 2 is the follower in this market. What is the follower’s total revenue function? Determine the equilibrium output level for both the leader and the follower. Determine the equilibrium market price. Determine the profits of the leader and the follower.Demand is assumed to be unit-elastic: X(p) = 1/p. There are m ≥ b2 firms operating in the market with constant marginal cost levels c1 ≤ c2 ≤ ……. ≤ cm. They engage in Cournot competition. a. Show that the equilibrium price implies Lerner indexes Where si is the market share of firm i. b. Using the equilibrium price, show that the profit of firm i is equal to (si)2. c. Show that the industry profit is equal to the Herfindahl index H = Σi(si)2. d. What is the effect of a specific taxt on equilibrium price? How does this tax affect the industry profit and the Herfindahl index?The demand function for a firm's domestic and foreignmarkets are:AT) (5.4)P¡ = 50 - 401Pa=40- 5Q2and the total cost function is:TC= 25 + 120, where Q = Qi + Q.a/ Determine the prices needed to maximize profit with and without pricediscrimination;b/ Find the maximum profit values in these two cases and give your comment.
