MICROECONOMICS+CONNECT RMU EDITION
21st Edition
ISBN: 9781264088874
Author: McConnell
Publisher: MCG
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Chapter 12, Problem 1P
To determine
Profit maximizing price and output.
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Use the accompanying graph to answer the questions that follow. (LO1, LO2) a. Suppose this monopolist is unregulated. (1) What price will the firm charge to maximize its profits? (2) What is the level of consumer surplus at this price? b. Suppose the firm’s price is regulated at $80. (1) What is the firm’s marginal revenue if it produces 7 units? (2) If the firm is able to cover its variable costs at the regulated price, how much output will the firm produce in the short run to maximize its profits? (3) In the long run, how much output will this firm produce if the price remains regulated at $80?
4. You are the manager of a monopoly, and your demand and cost functions are given by P = 300 − 3Q and C(Q) = 1,500 + 2Q2, respectively. (LO3, LO4)
a. What price–quantity combination maximizes your firm’s profits?
b. Calculate the maximum profits.
c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price–quantity combination?
d. What price–quantity combination maximizes revenue?
e. Calculate the maximum revenues.
f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price–quantity combination?
6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5)
a. Determine the profit-maximizing output and price.
b. What price and output would prevail if this firm’s product were sold by price-taking
firms in a perfectly competitive market?
c. Calculate the deadweight loss of this monopoly.
8. The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2.…
A monopolist’s inverse demand function is P = 150 − 3Q. The company produces out- put at two facilities; the marginal cost of producing at facility 1 is MC1(Q1) = 6Q1, and the marginal cost of producing at facility 2 is MC2(Q2) = 2Q2. (LO1, LO8)
a. Provide the equation for the monopolist’s marginal revenue function. (Hint: Recall
thatQ1 +Q2 =Q.)
b. Determine the profit-maximizing level of output for each facility.
c. Determine the profit-maximizing price.
Chapter 12 Solutions
MICROECONOMICS+CONNECT RMU EDITION
Ch. 12.4 - The MR curve lies below the demand curve in this...Ch. 12.4 - Prob. 2QQCh. 12.4 - Prob. 3QQCh. 12.4 - Prob. 4QQCh. 12 - Prob. 1DQCh. 12 - Prob. 2DQCh. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - Prob. 5DQCh. 12 - Prob. 6DQ
Ch. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - 10. LAST WORD Using Big Data to set personalized...Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5P
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- As the manager of a monopoly, you face potential government regulation. Your inversedemand is P = 40 − 2Q, and your costs are C(Q) = 8Q. (LO1, LO2, LO6)a. Determine the monopoly price and output.arrow_forwardWhich of the following statements regarding a profit-maximising monopolist is FALSE? O a. This firm might respond to a fall in demand by reducing both its output and its price. O b. This firm might respond to a fall in demand by reducing its output and increasing its price. O c. This firm would respond to a fall in the price of a variable input by increasing its output and reducing its price. d. This firm would respond to a fall in the price of a fixed input by increasing its output and reducing its price.arrow_forwardFigure: Maximum Willingness to Pay P $100 75 45 100 100 110 125 2 125 MR MC What is the profit-maximizing quantity for this monopolist? O 110 75 Darrow_forward
- Let the demand and cost curves for a monopolist be If the government imposes a price ceiling of $100 on the monopolist's price, what is the profit earned by the monopolist without and with the price ceiling? O No ceiling: $10,000 Ceiling: $0 O No ceiling: $10,000 Ceiling: $10,000 O No ceiling: $20,000 Ceiling: $10,000 Q = 1000 - 4P 20000 + 50Q TC O No ceiling: $20,000 Ceiling: $0arrow_forwardReference: Ref 11-2 (Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC'. Suppose further that after the innovation reduced the cost to ATC', it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be: a. $1,190. b. $3,400. c. $1,700. d. $3,060. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.arrow_forwardIn view of the problems involved in regulating natural monopolies, compare socially optimal (marginal-cost) pricing and fair-return pricing by referring again to Figure 12.9. Assuming that a government subsidy might be used to cover any loss resulting from marginal-cost pricing, which pricing policy would you favor? Why? What problems might such a subsidy entail?arrow_forward
- Consider a monopolist with demand ?? = 90 − 3? and marginal cost MC=20. Determine profit, consumer surplus, and welfare in the following cases: (a) single-price monopolist; (b) perfect price discrimination; (c) intertemporal price discrimination whereby in period 1 the monopolist sets price ?1 and whoever buys leaves the market, then in period 2 the monopolist sets price ?2 for whoever remains in the marketarrow_forwardLet the market demand curve be P = 70 - 2Q, and assume all sellers can produce at a constant marginal cost of MC = 10, with zero fixed costs. a. If the market is controlled by a monopolist, what is the equilibrium price and quantity? How much profit does the monopolist earn? b. Now suppose that Amy and Beau compete as Cournot oligopolists. What is the Cournot equilibrium quantity per seller, total market quantity, market price, and profit per seller? c. Now suppose Amy and Beau decide to collude and form a Monopoly. Amy produces half of the monopoly output. Use the best response functions derived in part b. to determine Beau's best response. Does Beau optimally produce half the monopoly output? Based on this result, does it seem likely that the firms will be able to sustain collusion? Why or why not? Explain.arrow_forwardIndicate whether the statement is TRUE, FALSE, or UNCERTAIN and explain why. 1. It is economically more efficient to have a monopolist that discriminates perfectlythan a monopolist that sets a single price. 2. If a monopsonist faces a perfectly elastic supply curve, there will be no deadweightloss relative to the competitive outcome 3. In a Cournot duopoly market, the two firms agree to produce half of the monopolyoutput level for that market and split the resulting profit. Since the monopoly profit is the highest profit that can be obtained, the two firms will always stick to that agreement even if it’s not legally (or in any other way) binding.arrow_forward
- In a market where a monopolist can charge different prices to different groups, which of the following groups will likely be charged the lowest price?O a. the group for which the good is a necessityO b. the group for which the good makes up a large portion of income (big-ticket item)O c. the group for which the good has no good substitutesO d. the group for which the good makes up a small portion of income (small-ticket item)O e. The groups described in (a), (c), and (d) will all get charged a lower price than the group described in (b).arrow_forwardPlease refer to the figure provided. Imagine that this market could be perfectly competitive, controlled by a monopolist who charges a single price or a monopolist who charges each customer a different price 1. How much is producer surplus if the market is controlled by a single-price monopolist? $ 2. Suppose now the monopolist is able to charge all customers the maximum price they are willing to pay, how much is the producer surplus?arrow_forwardAssume that annual inverse demand for a particular product is P=150-Q. The product is offered by a pair of Bertrand competitors, each with marginal costs of $75. The discount factor is 0.9. What is the current equilibrium price and total surplus? Now, assume though that if R&D is conducted at rate x, it incurs one-off costs of r(x)=10x^2 and reduces the marginal costs to (75-x). Suppose that one firm decides to conduct R&D at rate x=10. This research will be protected by a patent of T years. a) What profit(ignoring the one-off costs of R&D) does the innovating firm make each year during the period of patent protection? b) What is the new equilibrium price and total surplus once patent protection expires? c) Use your answer above to write the total surplus from the innovationarrow_forward
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