MICROECONOMICS (LL)W/ACCESS >IC<
20th Edition
ISBN: 9781308103341
Author: McConnell
Publisher: MCG/CREATE
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Chapter 12, Problem 2P
To determine
Profit maximizing output and price.
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Suppose ABC is still a monopolist selling to the two retailers but it now discovers that if retailers supply customer services, demand shifts to P = 90 – Q. Each retailer can provide the required services at a total cost of $400.
c. ABC decides to implement an RPM agreement with retailers. Under this agreement, what retail price should ABC specify? How many units will retailers sell at this price?
d. Under this RPM agreement, what is the maximum wholesale price that ABC can set? In answering this question, assume that at the RPM price competitive
pressure forces each retailer to offer the required services (i.e., any retailer offering a lower service level loses all its customers).
e. What is the consumer surplus and profits at this wholesale price? Has the RPM agreement improved social welfare?
Market demand for widgets is p = 160 - 2Q. Whether there is just one firm selling widgets or many firms selling widgets, the marginal cost and average cost is 100.Assume there are two firms selling widgets acting as Stackelberg duopolists, with Firm 1 moving first and Firm 2 following. Further assume that Firm 1's marginal profit function at its maximum is Mπ(q1) = 75 - q1, where q1 is the amount of widgets sold by Firm 1. What is the quantity sold for each firm?Options are:Firm 1 sells 0 Firms 2 sells 80Firm 1 sells 25 firm 2 sells 64.5Firm 1 sells 15, Firm 2 sells 30Firm 1 sells 7.5 Firm 2 sells 15From question 12 (Stackelberg duopolists), what is the price of widgets?Options are:1501158565
Consider a monopolist who is selling his blockbuster drug in two markets where one market is much larger than the other. Suppose the demand in the two markets is given by q1 = 30 − p1 and q2 = 3 − p2 (quantity is measured in millions of complete dosages and price is in your favorite currency) and the marginal cost of production and distribution is roughly the same and equal to 1 per unit (c=1). This problem asks you to compare equilibrium outcomes (prices, quantities, profits, consumer surplus, and consumer surplus per unit of output) when the monopolist can price discriminate across the two markets versus when it must set a uniform price. It then asks you to comment on some recent policy proposals.
For each market separately, set up and solve the monopolist’s profit-maximizing problem. Specifically, write down/compute the following.
Inverse demand and the profit functions.
Equilibrium prices (), quantities () and profits ()
Consumer surplus () and consumer surplus per unit of…
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- Suppose that the monopolist from Question 4 is now forced to charge the same price in both markets. Using thedemand functions and cost function from Question 4, what is the total inverse demand in this case? What is theprofit-maximizing price? What is the monopolist’s profit? (Question 4 = A monopolist is operating in two separate markets. The inverse demand functions for the two markets are P1 = 35 – 2.5Q_1 and P2 = 30 – 2Q_2. The monopolist’s total cost function is TC(Q) = 8 + 5(Q_1 + Q_2). Q_1 means Q subscript 1arrow_forwardSuppose a monopolist faces two markets with demand curves given by D1(p1) = 200 -p1 D2(p2) = 100 -2p2 Assume that the monopolist’s cost function is c(y) = y^2 1. What is the optimal prices for the monopolist if it can charge different prices in these markets? 2. What is the optimal price if the monopolist must charge the same price in each market? 3. How much total consumers’ surplus changes between the two separate prices and the same price cases? This is my fourth submission. no part of any previous solution was remotely right. I need this answered quickly. Yall have spent several days getting this wrong.arrow_forwardSuppose a monopolist faces two markets with demand curves given by D1(p1) = 200 -p1 D2(p2) = 100 -2p2 Assume that the monopolist’s cost function is c(y) = y^2 1. What is the optimal prices for the monopolist if it can charge different prices in these markets? 2. What is the optimal price if the monopolist must charge the same price in each market? 3. How much total consumers’ surplus changes between the two separate prices and the same price cases? Can I please be assigned an actual expert? The previous four answers have been incorrect. The last several questions I have asked have been plagued by mediocrity and poor answers.arrow_forward
- Suppose a monopolist faces two markets with demand curves given by D1(p1) = 200 -p1 D2(p2) = 100 -2p2 Assume that the monopolist’s cost function is c(y) = y^2 1. What is the optimal prices for the monopolist if it can charge different prices in these markets? 2. What is the optimal price if the monopolist must charge the same price in each market? 3. How much total consumers’ surplus changes between the two separate prices and the same price cases? Please answer this correctly, quickly,and legibly. This is my third submission of the same question. The first one was wrong and unredeemable the second one was not legible.arrow_forwardSuppose that a monopolist, who sells all units at a uniform price, faces an inverse market demand curve P=100- 2Q. a) If there is no cost of production, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variables, showing how you determined them. b) If the firm’s total cost were instead positive, given by the function TC=10Q, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variables, showing how you determined them.arrow_forwardSuppose a discriminating monopolist is selling a product in four separate markets in which demand functions are: Q1 = 300 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.4P3 and Q4 = 75 – 0.25P4. Assume further that the total cost of the firm is given as TC = 61,000 – 100Q. As an economic adviser you are required to determine: The prices to be charged in the fourmarkets and the amount of output to be sold in each market so that total profits can be maximized. Calculate the total profit to be made from the strategy of price discrimination. Explain what would have happened if this monopolist did not implement this strategy of price discrimination. Elasticities in each market and comment.arrow_forward
- A monopolist faces two markets with demand functions given by q1 = 120 − p1 q2 = 120 − 2p2 The monopolist has no fixed costs of production, and the marginal cost of production is $10. Suppose the monopolist charges the price $80 per unit of output. What is the market demand at this price? Suppose that the monopolist charges different prices per unit of output in the two markets. How much output is produced? What are the prices? What is the monopolist’s profit?arrow_forwardSuppose that a monopolist faces two markets with demand curves given by: D1 (p1 ) = 100 – p1 D2 (p2) = 100 – 2p2 And also assume that the monopolist’s marginal cost is constant at $20 a unit. 1. If the monopolist can price discriminate, what price should the firm charge in each market in order to maximize profits? 2. Suppose the firm cannot price discriminate, what price should it charge?arrow_forwardOne difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where Question 7 options: a) marginal cost equals price, whereas a monopolist produces where price exceeds marginal cost b) marginal cost equals price, whereas a monopolist produces where cost exceeds price c) price exceeds marginal cost, whereas a monopolist produces where marginal cost equals price d) marginal cost exceeds price, while a monopolist produces where marginal cost equals pricearrow_forward
- Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are: Q1 = 300 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.4P3 and Q4 = 75 – 0.25P4. Assume further that the total cost of the firm is given as TC = 65,000 – 100Q. As an economic adviser you are required to determine: The prices to be charged in the four markets and the amount of output to be sold in each market so that total profits can be maximized. Calculate the total profit to be made from the strategy of price discrimination. Explain what would have happened if this monopolist did not implement this strategy of price discrimination. Elasticities in each market and comment.arrow_forwardRefer to Diagram 2 above, which represents a monopolist firm, to answer the following questions. product = marginal product x selling price per unit). What quantity will this firm produce and what price will it charge? Suppose this monopolist firm becomes regulated and the regulatory agency wants to achieve economic efficiency. What price would the agency require the monopoly to charge and what quantity will the firm produce as a result? If the monopolist charges a price that will achieve economic efficiency, will the monopolist be making a profit or loss? Explain your answer with a calculation. Now suppose the government regulates the monopoly by imposing a price ceiling of $60. How many units will be produced? Will every customer who is willing to pay the ceiling price of $60 be able to buy the product? Explain why or why not. Based on the price ceiling of $60, what will be the profit of this monopolist?arrow_forwardAssume that a monopolist sells a product with a total cost function: TC = 1200+0.5Q2. The market demand curve is given by the equation: Q=300-P a) For this monopolist, the profit-maximizing price is _________, at which it will sell __________ units of output. b) If this market were supplied by many firms with the same cost function, how much would be produced? _____________ At what price would it be sold? ______________ c) Calculate the loss in efficiency in this market due to the monopoly _____________arrow_forward
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