MICROECONOMICS W/CONNECT
18th Edition
ISBN: 9781307253085
Author: McConnell
Publisher: Mcgraw-Hill/Create
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Chapter 12, Problem 2RQ
To determine
Marginal Revenue curve.
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As the manager of a monopoly, you face potential government regulation. Your inversedemand is P = 40 ā 2Q, and your costs are C(Q) = 8Q. (LO1, LO2, LO6)a. Determine the monopoly price and output.
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 firmās price is regulated at $80. (1) What is the firmās 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?
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 firmās 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 firmās product is ā2.5 and its advertising elasticity of demand is 0.2. (LO8)
a. Determine the firmās optimal advertising-to-sales ratio.
b. If the firmās revenues are $40,000, what is its profit-maximizing level of advertising?
Chapter 12 Solutions
MICROECONOMICS W/CONNECT
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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- Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3Ā a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firmās MC curve.arrow_forward1.Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) a Kansas wheat farm; (d) the commercial bank in which you or your family has an account; (e) the automobile industry. In each case, justify your classification. LO1arrow_forwardTwo firms with the same (constant) marginal costs are engaging in Bertrand competition. One of the companies exits the industry. As a aconsequence, the price for the other firm increases by 50%. What is the elasticity of demand in this market?O. 3O. 2O. 2.5O. 4arrow_forward
- Which of statement is true about economic profit in the long run.(LO2,3). a) both the monopolistic and perfect competitor make one. b) neither the monopolistic nor the perfect competitor makes one. c) only the perfect competitor makes one. d) only the monopolistic makes one.arrow_forwardConsider a set of 1000 companies operating in a competitive market.Ā The supply curve for this market is given by O = 20+2P and the demand curve is given by D = 280-4P, where quantity Q is measured in millions of tons and Price P is measured in monetary units. Considering that the marginal cost of the individual firm is given by 2Q, the quantity Q being measured in thousands of tons, we ask: a) Sketch the market equilibrium and the equilibrium of an individual firm. b) What is the situation of this market at that particular moment. c) Make considerations about the long-run equilibrium trend of this market.arrow_forwardA firm sells its product in a perfectly competitive market where other firms charge a price of $110 per unit. The firm estimates its total costs as C(Q) = 70 + 14Q + 2Q2. (LO3) b. What price should the firm charge in the short run? c. What are the firmās shortĀ run profits? d. What adjustments should be anticipated in the long run?arrow_forward
- Suppose that the pen-making industry is perfectly competitive. Also suppose that each current firm and any potential firms that might enter the industry all have identical cost curves, with minimum ATC = $1.25 per pen. If the market equilibrium price of pens is currently $1.50, what would you expect it to be in the long run? LO11.2 Ā a. $0.25. b. $1.00. c. $1.25. d. $1.50.arrow_forwardNow assume that firm T faces a downward-sloping (straight-line) demand Fill in the columns for TR and MR in the table (Note that the figures for MR are entered between 0 and 1, 1 and 2, 2 and 3, etc.) The demand curve for the product of firm T Price (AR) (Ā£) Quantity (Units) Total Revenue (TR) (Ā£) Marginal Revenue (MR) (Ā£) 20 18 16 14 12 10 8 6 0 1 2 3 4 5 6 7 ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ Ā ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ ā¦ā¦ā¦ Ā (b)Ā Ā Ā What is the price elasticity of demand at P = Ā£10?.................................................................... (c)Ā Ā Ā Over what price range is demand price elastic?......................................................................... (d)Ā Ā Ā Ā Ā Over what price range is demand price inelastic? ....................................................................................arrow_forwardFigure: Maximum Willingness to Pay P $100 75 45 100 100 110 125 2 125 MR MC What is the profit-maximizing quantity for this monopolist? O 110 75 Darrow_forward
- The market demand for a type of good has been estimated as: P= 40 - 0.25Q, where Pis price ($) and Q is rate of sales per month. The long run market supply is expressed as: P 10.0 + 0.05Q. %3D There is a firm operating in this market that is characterized by following long run marginal cost: MC = - 20.0 + 5.0q What would be the return to firm specific advantage for this firm? O. 66.24 O. 44.15 O. 82.5 O. 33.72 O. 14.75 O. 54.25 O. 62.17arrow_forward. (Requires calculus). In the model of a dominant firm, assume that the fringe supply curve is given by Q = -1 + 0.2P, where P is market price and Q is output. Demand is given by Q = 11 – P.What will price and output be if there is no dominant firm? Now assume that there is a dominant firm, whose marginal cost is constant at $6. Derive the residual demand curve that it faces and calculate its profit-maximizing output and price. highest bidder, but both the winning and losing bidders must pay her their bids. So if Jones bids $1 they pay a total of $3, but Jones gets the money, leaving him with a net gain of $98 and Smith with -$1. If both bid the same amount, the $100 is split evenly between them. Assume that each of them has only two $1 bills on hand, leaving three possible bids: $0, $1 or $2. Write out the payoff matrix for this game, and then find its Nash equilibrium.arrow_forwardDraw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpolyarrow_forward
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