MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 11, Problem 6CACQ
(A)
To determine
The optimal number of units to put in a package is to be ascertained.
(B)
To determine
Price that the firm would charge for this package is to be calculated.
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You own a road resurfacing business called Rockit Asphalting services located in Kingston. You are the only reservicing business in Southern Tasmania. Therefore, you have a local monopoly. Your experience running the company for many years has taught you that market demand for your service can be described by the demand function:
p = 20 − q.
The cost function is c = q2. Therefore, marginal cost equals 2q. Quantity refers to square metre of road resurfacing. Note the Q denotes aggregate market demand and q denotes your production. Of course, if you are the only supplier than q = Q.
Compute profit maximising price and output. Compute profits.
The monopoly profit that you have been earning has attracted attention from another firm that will set up operations in Southern Tasmania and compete for market share. You are concerned with losing market share and profit. So, you offer the potential entrant the following deal. Both firms agree to maximise industry profits (joint…
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer's demand for the product is Q = 80-0.5P, and the marginal cost of production is $ 100.
a) Determine the optimal number of units to put in a package.
b) How much should the firm charge for this package?
c) How much additional profit does the company earn compared with charging this consumer a per-unit price?
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 50 - 0.25P, and the marginal cost of production is $120.
Determine the optimal number of units to put in a package.
How much should the firm charge for this package?
Chapter 11 Solutions
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