Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 15, Problem 10PA
Subpart (a):
To determine
The profit maximization, dead weight loss and social welfare.
Subpart (b):
To determine
The profit maximization, dead weight loss and social welfare.
Subpart (c):
To determine
Dead weight loss.
Subpart (d):
To determine
The profit maximization, dead weight loss and social welfare.
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Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether and how to enter a potential market.
Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT.
To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost.
Assume Verizon enters and builds a Large store (i.e. chooses to build a Large store L1 at the first stage.)
Calculate Verizon's profit for the following cases:
a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice.
b.) ATT chooses to build a Small store S at the second stage…
Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether and how to enter a potential market.
Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT.
To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost.
Assume Verizon stays out of the potential market (i.e. chooses not to enter N1 at the first stage, q1= 0).
Calculate Verizon's profit for the following cases:
a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice.
b.) ATT chooses to build a Small store S at the second stage…
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD
Demand :P =1000-10Q
Total Revenue : TR=1000Q-10Q2
Marginal Revenue: MR=1000-20Q
Marginal Cost: MC=100+10Q
Where Q indicates the number of copies sold and P is the price in Ectenian dollasrs.
a. Find the price and quantity that maximize the company's profit
b. Find the price and quantity that would maximize social welfare
c. Calculate the deadweight loss from monpoly.
d. Suppose in addition to the costs above. the director of the film has to be paid. The company is considering four options
i. a flat fee of 2000 Ectenian dollars
ii. 50 percent of the profits.
iii. 150 Ectenian dollars per unit sold
iv. 50 percent of the revenue.
For each option, calculate the profit-maximizing price and quantity. Which if any of these compensation schemes would alter the deadweight loss from monopoly. Explain.
Chapter 15 Solutions
Principles of Microeconomics (MindTap Course List)
Ch. 15.1 - Prob. 1QQCh. 15.2 - Prob. 2QQCh. 15.3 - Prob. 3QQCh. 15.4 - Prob. 4QQCh. 15.5 - Prob. 5QQCh. 15 - Prob. 1CQQCh. 15 - Prob. 2CQQCh. 15 - Prob. 3CQQCh. 15 - Prob. 4CQQCh. 15 - Prob. 5CQQ
Ch. 15 - Prob. 6CQQCh. 15 - Prob. 1QRCh. 15 - Prob. 2QRCh. 15 - Prob. 3QRCh. 15 - Prob. 4QRCh. 15 - Prob. 5QRCh. 15 - Prob. 6QRCh. 15 - Prob. 7QRCh. 15 - Prob. 8QRCh. 15 - Prob. 1PACh. 15 - Prob. 2PACh. 15 - Prob. 3PACh. 15 - Prob. 4PACh. 15 - Prob. 5PACh. 15 - Prob. 6PACh. 15 - Prob. 7PACh. 15 - Prob. 8PACh. 15 - Prob. 9PACh. 15 - Prob. 10PACh. 15 - Prob. 11PACh. 15 - Prob. 12PA
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