MICROECONOMICS LLW/CNCT >BI<
21st Edition
ISBN: 9781260531350
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 12, Problem 8DQ
To determine
Price regulation and monopoly .
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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. (LO8)
a. Determine the firm’s optimal advertising-to-sales ratio.
b. If the firm’s revenues are $40,000, what is its profit-maximizing level of advertising?
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?
1.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. LO1
Chapter 12 Solutions
MICROECONOMICS LLW/CNCT >BI<
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_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_forward14. Aside from advertising, how can monopolisticallycompetitive firms increase demand for their products? 17. Would you expect the kinked demand curve to bemore extreme (like a right angle) or less extreme (like anormal demand curve) if each firm in the cartel producesa near-identical product like OPEC and petroleum?What if each firm produces a somewhat differentproduct? Explain your reasoning.arrow_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_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_forward11 21. Imagine an N firm oligopoly for "nominally differentiated" goods. That is, each of the N firms produces a product that "looks" different from the products of its competitors, but that "really" isn't any different. However, each firm is able to fool some of the buying public. Specifically, each of the N firms (which are identical and have zero marginal cost of production) has a captive market -consumers who will buy only from that firm. The demand generated by each of these captive markets is given by the demand function Pn A- Xn , where Xn is the amount supplied to this captive market and Pn is the price of the production of firm n. There is also a group of intelligent consumers who realize that the products are really undifferentiated. These…arrow_forward
- Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompanies’ total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.arrow_forward9. Suppose Warner Music and Universal Music are in a duopoly and currently limit themselves to 10 new artists per year. One artist sells 2 million songs at $1.25 per song. However, each label is capable of signing 20 artists per year. If one label increases the number of artists to 20 and the other stays the same, the price per song drops to $0.75, and each artist sells 3 million songs. If both labels increase the number of artists to 20, the price per song drops to $0.30, and each artist sells 4 million songs. Explain how revenue payoffs for each scenario are calculated. If this game is played once, how many artists will each producer sign, and what will be the price of a song? If this game is played every year, how many artists will each producer sign, and what will be the price of a song?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
- 14.6. Product positioning and price competition. Consider a duopoly where horizon- tal product differentiation is important. Firms first simultaneously choose their prod- uct locations, then simultaneously set prices in an infinite series of periods. Suppose that firms collude in prices in the second stage and anticipate they will do so at the product-positioning stage. In this context, what do you expect the degree of product differentiation to be?.arrow_forward9. Suppose that the downstream market for widgets is characterized by the inverse demand curve P = 100 - Q. Widget retailer is controlled by the monopolist WR Inc., which obtains its widgets from the monopoly wholesaler WW Inc. at a wholesale price of ww per widget, WW inc. obtains the widgets in turn from the monopoly manufacturer WM ltd. at a manufacturing price of wm per widget. WM Inc. incurs marginal costs of $10 per unit in making widgets. WW and WR each incur marginal costs of $5 in addition to the prices that they have to pay for widgets. What is the equilibrium widget price to consumers, P, the equilibrium wholesale price ww and the equilibrium manufacturing price wm? What is the profit earned by each firm at these prices? Show that vertical integration by any two of these firms increases profit and benefits consumers. Show that integration of all three firms is even more beneficial.arrow_forward2. Suppose that the market demand for mountain spring water is given as follows: P = 1,200 - QMountain spring water can be produced at no cost. a. What is the profit maximizing level of output and price of a monopolist? b. What level of output would be produced by each firm in a Cournot duopoly in the long run? What will the price be? c. What will be the level of output and price in the long run if this industry were perfectly competitive?arrow_forward
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