EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 12, Problem 7DQ
To determine
Re importation of drugs to USA.
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The figure on the right shows the demand schedule for a product produced by a
single-price monopolist.
Price ($)
9
8
0000
7
6
5
4
3
C. 5th unit
Quantity
demanded
What is the lowest level of output at which marginal revenue becomes negative?
OA. 6th unit
OB. 9th unit
D. 7th unit
OE. 8th unit
5
6
7
8
9
10
11
Price ($)
141
222 =26=LO
13-
12-
11-
10-
9-
8-
4-
2-
1-
45 6 7 8 9 10 11 12 13 14 15 16
Quantity
E
A local magic shop has a monopoly on the production of magic wands. Each customer wants only one magic
wand, and the table below shows each customer's willingness to pay. The marginal cost of producing a wand is
$21 no matter how many are produced.
Quantity demanded
Price per wand ($)
LO
01 2 3 4 5
6 78
30 27 24 21 18 15 12 96
If the shop can charge only a single price, it will charge $
wands.
If the firm practices perfect price discrimination, it will sell a total of
earn a profit of $|
and sell
wands and
The following diagram depicts the operating conditions for a profit-maximising monopolist. Calculate the deadweight loss created by this monopoly selling at the profit maximising point.
Price ($)
MC
10
Demand
MR
5
7.5
10
Quantity
(a) $4.25
(b) $6.25
(c) $8.25
(d) None of the above.
20
15
LO
20
15
Chapter 12 Solutions
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- Ignore AFC and AVC 2. Suppose a pure monopolist faces the following demand schedule and the same cost data as the competitive producer discussed in problem 4 at the end of Chapter 10. Calculate the missing TR and MR amounts, and determine the profit-maximizing price and profit-maximizing output for this monopolist. What is the monopolist's profit? Verify your answer graphically and by comparing total revenue and total cost. LO11.4 Average Total Average Variable Average Marginal Product Fixed Cost Cost Total Cost Cost 0 $45 1 $60.00 $45.00 $105.00 40 2 30.00 42.50 72.50 35 3 20.00 40.00 60.00 30 4 15.00 37.50 52.50 35 5 12.00 37.00 49.00 40 6 10.00 37.50 47.50 45 7 8.57 38.57 47.14 55 8 7.50 40.63 48.13 65 9 6.67 43.33 50.00 75 10 6.00 46.50 52.50 Price Quantity Demanded Total Revenue Marginal Revenue $115 83 63 55 48 42 29 2 % 522332 100 0 1 2 3 4 5 6 7 37 8 9 10 $arrow_forwardThe figure below shows the total cost and total revenue curves for a monopolist. The profit - maximizing output for the monopolist is 1 unit 2 units 3 units 4 units 5 units The figure below shows the total cost and total revenue curves for a monopolist. The profit-maximizing output for the monopolist is $100 90 80 70 60 50 40 30 20 10 1 unit 0 1 2 3 4 5 6 7 8 9 2 units 3 units O4 units. TR 5 units Q/tarrow_forwardA company sells its product in foreign and domestic markets, as illustrated in the figures below: Domestic Market Foreign Market Price ($) 20 Price ($) 20 18 18 16 16 14 14 12 12 10 10 6. 6 MC MC 4 4 2- MR MR 10 12 4. 8. 10 12 Quantity Quantity Suppose the company uses third-degree price discrimination (or segmenting). What is the profit-maximising price in the domestic market? O a. $8.67 O b. $12.00 Oc. $7.67 O d. $7.00arrow_forward
- 1. The table below represents the demand for Widgets, Inc., which has a monopoly in the sale of widgets. Calculate total revenue and marginal revenue for the levels of output given. Draw the demand curve and the marginal revenue curve in a same graph. Quantity 0 1 2 3 4 LO 5 Price $25 21 17 13 9 LO 5arrow_forward(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company is a monopoly, how much producer surplus is there when the monopolist maximizes profit? Price, Costs, Marginal Revenue O $180 O $90 O $0 O $20 $100 90 80 70 60 50 40 30 20 10 0 MR 1 2 3 4 5 6 7 8 9 Quantity (Thousands of subscriptions)arrow_forwardurgent Question 3.Assume that a Swiss drug company holds the patent on a malaria medicine that has no closesubstitutes. If it charges the same price in every country where it sells this medicine, a price thatwill maximize its profits, that price will exceed what the vast majority of consumers in twentylower-income countries can afford to pay.a) Illustrate this situation using supply and demand curves.b) Use supply and demand curves to show how the Swiss company can sell at different prices ineach country and make a profit in each. Identify on the curves the profit the Swiss companymakes in a typical poorer country, and the profit it makes in a wealthier country.c) What condition is necessary for the Swiss company to be able to follow this strategy?arrow_forward
- А. What is the reason for a monopolist to practice price discrimination? Describe one form of price discrimination in which a monopolist produces the same output as a perfect competitive industry. Explain clearly why the monopolist does so instead of producing the same output as a single-price monopoly. В. С. Movie theaters charge a lower price for morning shows and a higher price for evening shows. With a clearly labeled figure, show and explain the form of price discrimination practiced by movie theaters.arrow_forwardIn 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_forwardA monopolist is chooses their price (and the associated quantity implied by their demand curve) such that the price elasticity demand could be either -0.5 or -1.2. Which of the following statements are true: O -0.5 could be profit maximising, but -1.2 could not be profit maximising O Neither price-elasticities of demand could be profit maximising O Both price elasticies of demand could be profit maximising O -1.2 could be profit maximising, but -0.5 could not be profit maximisingarrow_forward
- Which of the following statements is not correct? Select one: O a. A single price monopolist is more efficient than perfectly competitive market because it makes a larger profit. O b. A single price monopolist charges more than the competitive market. Oc A single price monopolist increases produces surplus at the expense of consumer surplus. Od. A single price monopolist produces less than the competitive market. Oe. A single price monopolist faces a downward sloping demand curve.arrow_forwardSuppose that demand is Qlp)-2000-4p. Consider the marginal revenue curve of a monopolist who operates in this market. Assume that it is plotted on a two-axis graph in which the horizontal axis measures quantities and the vertical axis measures marginal revenue. What is the horizontal intercept of the marginal revenue curve? O 500 O 750 O 1000 O 2000 O 250arrow_forwardAssume that you are a loyal customer from Lanuit Coffee and you always buy Americano coffee from Lanuit Coffee with the price USD 10, but then you look the Toast n Bread store bundling package that consists of the various coffee brand: Happy Coffee with Toast n Bread package USD 20. Which one will you choose? Will you still buy coffee from Lanuit Coffee? And as a loyal customer, which one more elastic, Lanuit Coffee or Happy Coffee for you? If you as the management of Lanuit Coffee, what will you do to keep the loyal customer, and how about your opinion with the elasticity of demand in Lanuit Coffee products? Please explain your answer.arrow_forward
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