To answer this question, you will want to work out the answer using a graph on a piece of scratch paper (not turned in). You are going to compare the outcomes in the case where there is perfect competition to the monopoly case. So, as an intermediate step, you will need to compute the equilibrium outcomes under competition and monopoly. Suppose that you have the following information about the demand for oil. Price ($/barrel) 80 70 60 50 40 30 20 10 Suppose that the marginal cost to produce a barrel of oil is $20. What is the deadweight loss if the oil market is a monopoly? Quantity demanded(# barrels) 5 6 7 8 9 10 11 12
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- Suppose the European Union (EU) is investigating a proposed merger between two of largest distillers of premium Scotch liquor. Based on estimates from the EU’s economists, these two firms have a combined market share of about two-thirds of all sales in the relevant market. The only remaining firm controls the other one-third of the market. Economists have estimated that the wholesale market price elasticity of demand for Scotch is −1.3 and the unit cost to produce and distribute the Scotch is 16.20 per liter. Using the available information, provide quantitative estimates of the pre- and post-merger prices for Scotch in the wholesale market. In your opinion, is the EU’s concern about the merger justified? Why or Why not?Consider a mature maket with a demand given by P=105.4-10Q The cost of production is given by C=10Q For many years this market has been served by a monopolist. How much profit would the firm lose if it is forced to behave as a competitive firm In all your calculations use numbers with 4 decimal places.Mustapha maintains a monopoly in the holographic TV market because of its patent but it is about to expire. The market demand and Mustapha’s production cost are given by: P = 100 − 0.5? and ?? = 100 + 0.5Q2 The monopoly profit is. a. $3,750.00 b. $2,400.00 c. $3,000.00 d. $2,500.00
- (1) A monopolist is forced to lower its price in order to sell another unit of its product. This describes the problem of A-persistent economic profits. B-market power. C-diseconomies of scale D-economies of scale. E-market discrimination (2)Koel is the single producer of home air conditioners in its rural market. The firm's monthly demand is described by the equation P = 5000 − 5Q, where P is the price and Q is the quantity of units sold. Which of the following must be true of Koel? A-An increase in price decreases the quantity sold. B-It is a natural monopoly. C-A decrease in price decreases the quantity sold. D-Higher levels of output bring in increasingly lower total revenue if demand is elastic. E-Maintaining the current price decreases the quantity sold over time. (3)Nori is a firm that sells products in an industry with a very high concentration of sellers. Nori's production decisions must consider its competitors' possible production decisions. In which market must…Suppose Bedox is a patent drug for man’s beauty. Her manufacturer faces a market demand for Bedox of Q = 1,000 – 0.2P. She has a cost function of C = 300,000 – 1,000Q + 10Q2 . a. What is the profit-maximizing output level and price? What is the profit? Show your calculation. b. Show the above results on a well-labeled diagram. c. Suppose the government considers this “unfair to consumers” by allowing Bedox to charge such a high price. As such, the government has decided to impose a lump-sum tax of $200,000 on Bedox. Explain whether this policy can help alleviate the “unfairness to consumers”.A competitive industry has production processes that generate pollution. okay with studies carried out on the affected population, the marginal costs associated with contamination are constant and 500 u.m. for each unit of the good produced. These costs are associated with lost working days, illness treatment costs and the nuisance generated in the population. Currently the production level of the industry is 250 units and the market price is 1500 (um/unit). Market studies carried out by the firms estimate that if the price rises at 1,800 (mu/unit) the quantity demanded would drop to 200 units and the marginal cost of production of each firm at this new production level is 1,300 (m.u./unit). assume linearity in market demand and in the marginal costs of production of the firms. Graph to justify your answers. )Determine the level of tax that would have to be applied to production to achieve the social optimum.
- A competitive industry has production processes that generate pollution. okay with studies carried out on the affected population, the marginal costs associated with contamination are constant and 500 u.m. for each unit of the good produced. These costs are associated with lost working days, illness treatment costs and the nuisance generated in the population. Currently the production level of the industry is 250 units and the market price is 1500 (um/unit). Market studies carried out by the firms estimate that if the price rises at 1,800 (mu/unit) the quantity demanded would drop to 200 units and the marginal cost of production of each firm at this new production level is 1,300 (m.u./unit). assume linearity in market demand and in the marginal costs of production of the firms. Graph to justify your answers. b)Graphically indicate and determine the magnitude of the social cost of the situation with a production level of 250 units.Consider Bridget. Bridget makes Widgets and Wodgets, a most favored snack. Given the popularity of Bridget’s Widgets and Wodgets, Bridget wants to make the snack available to as many people as possible. To this end, Bridget uses price discrimination. Analyze how regulations against price discrimination can harm consumers. Bridget decides to enhance production of the Widgets and Wodgets by using additional machinery for packaging. If the new machinery increases production such that Bridget would make an additional $10,000 a year for the expected 10 year life of the machinery. Bridget’s cost of funds is 6%. What is the maximum Bridget would be willing to pay for the machinery? Show your calculations. Describe how this new machinery would affect Bridget’s earning potential compared to Bridget’s competitor, Slugworth, who does not use the machinery. Bridget’s Widgets and Wodgets are so successful, Bridget decides to sell the Widgets and Wodgets in Canada. Explain why some Canadians…X company is a monopoly. Demand equation in this market is given as: ? = 100 − 2P and total cost equation is as the following: ?? = 2? 2 + 10. Find monopoly quantity, price and profit.
- In the 1928, Knoxville was served by a single railroad line. Because alternative forms of transportation were not close substitutes for rail transportation in 1928, this railroad had a transportation monopoly in Knoxville. The estimated monthly fixed cost associated with operating a railroad was $1,200. In addition, there was a constant average variable cost and marginal cost of $0.02 per ton-mile associated with the railroad's operation. The estimated monthly demand for transportation on the railroad was: Qd = q = 80,000 - 1,000,000P where Qd was the monthly quantity demanded in ton-miles and P was the price per ton-mile in dollars. Based upon the above equation, answer the following questions: a. What is the profit-maximizing price and quantity? b. Would a private company build the railroad? c. What is the socially optimal price and quantity?There is a monopolist, Concrete Mex, in the concrete market in Mexico. The demand function is Qd= 100-50p. The marginal cost of production is c = 0.4. a) ConcreteMex claimed the high price is due to high transportation costs and persuaded the government to help cut down the costs. As a result, for every unit of concrete sold, the government subsidizes ConcreteMex 0.2 dollars. What are the new profit maximizing price and production level for ConcreteMex? b) Under the subsidy policy and the new price in a part, calculate the consumer surplus, producer surplus, and deadweight loss. You do not need to consider government spending for the deadweight loss. c) Suppose ConcreteMex wants to enter a different market, the competitive market in Texas. To enter the market, ConcreteMex needs to pay a fixed cost of F = 1, and its variable cost in Texas is VC = (0.4+Q)Q. What is ConcreteMex’s total cost, marginal cost, and average total cost in Texas at production level Q?Study the diagram below, in which the monopoly depicted is maximising profit and answer the question What is the total profit?a) R3b) R4c) R6d) R9