MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 8CACQ
To determine
Whether the value of the company will be maximized by paying upstream and downstream divisional manager a percentage of their divisional profits.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A large firm has two divisions: an upstream division that is a monopoly supplier of an input whose only market is the downstream division that produces the final output. To produce one unit of the final output, the downstream division requires one unit of the input. If the inverse demand for the final output is P = 1,000 − 80Q, would the company’s value be maximized by paying upstream and downstream divisional managers a percentage of their divisional profits?
PakMonoG’s inverse demand function is P = 100 – 2Q and cost function is TC = 10 + 2Q,
where Q is quantity in units and P price in PKR.
Determine the profit-maximizing price, quantity and profit (or loss) of PakMonoG.
If we were to compare PakMonoG with a perfect competitive firm in the market, are there differences in characteristics of the two structures?
What are welfare implications? Is total societal welfare of the firm higher or lower than that of a competitive firm?
You own a private parking lot near shard building 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.
Derive your marginal revenue schedule.
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 shard building charges you £30 per car per month as part of its policy to discourage the use of private cars in the city centre.
What is your profit maximising price?
Chapter 11 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
Knowledge Booster
Similar questions
- You are the manager of a firm that produces output in two plants. The demand for your firm's product is P= 26 2Q, where Q=Q1+Q₂2. The total costs associated with producing in the two plants are Ci(Q₁)=5+1.5Q and C₂ (22) = 10 +22 How much output should be produced in plants 1 and 2 in order to maximize profits? Q₁ 22 What is the monopoly price?$ What are their maximum profits using both plants? $ Suppose the firm has already built plant 1 and the fixed cost of production is sunk. But, plant 2 has not yet been built yet, the fixed cost of production are not sunk. If they use only plant 1, what is their maximum profit? $ Should the firm build the second plant?arrow_forwardYou are the manager of a monopoly. A typical consumer's inverse demand function for your firm's product is P = 250- 4Q, and your cost function is TC = 10Q. A. MC is fixed and is equal to $10 (MC=AC=S). MR=250-8Q. (P=price, Q=quantity of output, TC=total cost, MC=marginal cost, MR=marginal revenue, S=supply) What price the company should choose to get maximum profit if the company will use ordinary pricing strategy? Now suppose the company is thinking about using price discrimination for lower income group of customers. If the company will offer discount of $30 in price to the lower income groups how much additional profit will the company earn? Illustrate graphically. Explain the conditions needed to apply the price discrimination strategy?arrow_forwardAssume that a monopoly is constrained to charging the same price for each unit it sells, and assumption BIG holds. It faces a demand curve equal to MWTP(Q) = 160 - 0.5Q, and MC(Q) = 60. What is the monopoly's producer surplus if a regulator directs it to sell the efficient quantity? Round to two decimal places, do not include a currency symbol, and enter the negative sign if the answer is negative. If your answer is -$1.275, enter -1.28.arrow_forward
- Chillman Motors, Inc., is an oligopolist and faces the following kinked demand curve: The demand function can be expreseed algebraically as: P= 200-0.4Q when 0<Q<50 280-2Q when Q>50 Calculate the marginal revenue function facing chillman? Chillman's total cost function is TC=500+40Q+0.5Q2 Chillman maximizes profit by selling units at a price of $ per unit.arrow_forwardA monopoly profit-maximizes by selling 700 tables each hour. At this level of production, it has marginal revenue of $40, average revenue of $50, marginal cost of $40 and average total cost of $42. What is the monopoly's profit-maximizing price assuming they are not price discriminating? Type your numeric answer and submitarrow_forwardConsider a market with a monopoly firm. Sales revenue of this firm is $15,960,000 total cost is $8,680,000 and average cost is $3.10 Another firm wants to enter the market and provide the same product at a lower price. To intimidate the potential competitor, the monopoly firm intends to use predatory pricing.By how much can this firm reduce the price of its product without losses? Enter your answer in the box below and round to two decimal places if necessary.arrow_forward
- 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 + 10Q^2. What is the profit-maximizing output level and price? What is the profit? Show your calculation and the calculated results on a well-labeled diagram.arrow_forwardThe cost function for producing ethanol from municipal waste (wastehol) is 1000+10q2 where 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?arrow_forwardIf a monopoly faces an inverse demand curve of p=330-Q, has a constant marginal and average cost of $90, and can perfectly price discriminate, what is its profit? What are the consumer surplus, welfare, and deadweight loss? How would these results change if the firm were a single-price monopoly? Profit from perfect price discrimination () is $ 28800. (Enter your response as a whole number.) Corresponding consumer surplus is (enter your response as whole numbers): welfare is and deadweight loss is CS=$ W = $ DWL = $ Aarrow_forward
- Under patent protection, a firm has a monopoly in its production. Market demand is estimated to be P = 400 – 0.2Q. The firm’s economic costs are given by ATC = MC = $80 per unit. After the firm’s patent expires, predict the new market output and price under perfect competition. Assume that competing suppliers have the same economic costs as the original producer. What is the new market price, quantity, and total industry profit?arrow_forwardThe market demand function is represented by P = 10,070 -2Q. In this market demand function, Pand Q represent the price level and output respectively. The total cost function of firm(s) in this market can be represented as TC = 50,000 + 0.3Q + 0.01Q2 in which the relevant marginal cost function will be MC = 0.3 + 0.02Q. What will be the net market surplus under a monopoly? The supply function is S = MC = 0.3 + 0.02Q.arrow_forwardSid is the CEO of a local power plant operating in monopoly market structure. Explain why the demand curve (P) here is larger than the MR, and why Sid won’t produce on the inelastic portion of demand curve. Draw a graph comparing Sid’s market structure with a market in perfect competition (on the same graph). Be sure to label the components of deadweight loss. On a separate graph, show the case where the monopoly is making a positive profit and label the profit area.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education