Principles of Microeconomics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165905
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 7PA
Subpart (a):
To determine
Monopoly pricing and price elasticity of demand .
Subpart (b):
To determine
Monopoly pricing and price elasticity of demand .
Subpart (c):
To determine
Maximize total revenue.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Hi! I got stuck with my microeconomics homework. Can you please help? Here's the problem:
A monopolist knows that in order to expand the quantity of output it produces from 8 to 9 units it must lower the price of its output from $2 to $1. Calculate the quantity effect and the price effect. Use these results to calculate the monopolist’s marginal revenue of producing the 9th unit. The marginal cost of producing the 9th unit is positive. Is it a good idea for the monopolist to produce the 9th unit?
It is from Microeconomics: Canadian Edition
by Paul Krugman; Robin Wells; Iris Au; Jack Parkinson
Consider the relationship between monopoly pricing and price elasticity of demand.a. Explain why a monopolist will never produce a quantity at which the demand curve isinelastic. (Hint: If demand is inelastic and the firm raises its price, what happens to totalrevenue and total costs?)b. Draw a diagram for a monopolist, precisely labeling the portion of the demand curve thatis inelastic. (Hint: The answer is related to the marginal- revenue curve.)c. On your diagram, show the quantity and price that maximize total revenue.
Sara is a single-price, profit-maximizing monopolist who sells her own patented perfume (shown in the graph below).
a. What is the equilibrium price and quantity under monopoly conditions?
b. If instead Sara had to operate like a competitive firm, what would be the equilibrium price and quantity?
c. What is the deadweight loss and total loss to consumer surplus when Sara operates as a monopoly?
d. How much surplus would Sara have if she could act as a perfectly price-discriminating monopolist?
Chapter 15 Solutions
Principles of Microeconomics, 7th Edition (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. 11PA
Knowledge Booster
Similar questions
- The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.arrow_forward**YOU ONLY HAVE TO ANSWER QUESTION H**arrow_forwardProblem 11-11 (algo) A monopolist's price is $24. At this price the absolute value of the elasticity of demand is 3. What is the monopolist's marginal cost? Instructions: Round your answer to the nearest penny (2 decimal places). 24 Suppose you own a firm that produces widgets and is a monopoly. The market demand is given by the equation P= 100 – 2Q, where Pis the price of gadgets and Qis the quantity of gadgets sold per week. The firm's marginal costs are given by the equation MC = 16Q. When the monopolist maximizes profits the price elasticity of demand for widgets (rounded to two decimals) is Multiple Choice 1.00. 1.10 1.38. 0.72.arrow_forward
- The accompanying graph depicts the marginal revenue (MR), demand (D), and marginal cost (MC) curves for a monopoly. Suppose the monopolist able to successfully price discriminate between two groups by charging one group $60 and charging $35 to the other group. c. What are the firm's profits if it charges the two prices as mentioned above?arrow_forwardV10arrow_forwardThe following table shows the demand for a product produced by a monopolist, who has a constant marginal cost and an average total cost of 45 per unit. Quantity Price per unit 0 120 1 105 2 90 3 75 4 60 5 45 6 30 Calculate the total revenue and marginal revenue for the level of quantity. What are the profit-maximizing output level and price level of the product? In no more than three sentences, explain why. Calculate the monopolist’s profit. Calculate the Lerner Index for this industry.arrow_forward
- The graph shows cost and revenue curves for producing different amounts of chairs. Suppose the market for chairs in this example is a monopoly. On the graph, suppose that: A-$37, B-$15, C-$12, D=30 and E-43. Price B I D MR 1 E MC D Quantity How much revenue will the monopolist firm generate?arrow_forwardOnly one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P=15-Q Marginal Revenue: MR = 15-20 Total Cost: Marginal Cost: TC=3+Q+0.50² MC = 3+Q where Q is quantity and P is the price measured in Wiknamian dollars. The monopolist produces soccer balls and sells them at a price of s each. The monopolist's profit is s The domestic production of soccer balls will to Wiknam will soccer balls in this case. One day, the King of Wiknam decrees that henceforth there will be free trade-either imports or exports-of soccer balls at the world price of $10. The firm is now a price taker in a competitive market. soccer balls, and domestic consumption will to in this case. In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world…arrow_forwardSuppose that the monopolist's demand is: P = 8 – Q, and marginal revenue is: MR = 8 – 2Q. - The marginal cost is: MC = 2, and there is no fixed cost. a.Find out the profit maximizing output level. b.Specify the amount of economic profit or loss at the profit maximizing output. c.Calculate the price elasticity of demand at the profit maximizing point and explain it.arrow_forward
- Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost: Demand: P = 10 - Q Marginal Revenue:MR = 10 - 2 Q Total Cost TC= 3 + Q+0.5 Q2 Marginal Cost: MC= 1+ Q, where Q is quantity and Pis the price measured in Wiknamian dollars. a. How many soccer balls does the monopolist produce? At what price are they sold? What is the monopolist's profit? b. One day, the King of Wiknam decrees that henceforth there will be free trade-either imports or exports of soccer balls at the world price of $6.The firm is now a price taker in a competitive market What happens to the domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls? c. In our analysis of international trade in Chapter a country becomes an exporter when the price without trade is below the…arrow_forwardSuppose there is a monopolist in the market for a specific video game facing a demand curve: P = 20-0.5Q with MR = 20 - Q. The monopolist marginal cost curve is MC = 4, its total variable costs are TVC = 4Q and it faces a total fixed costs equal TFC = $102. a. What is the optimal quantity to maximize profit? b. What is the optimal price to maximize profit? c. What is the profit for the monopoly? d. What is the consumer surplus?arrow_forwardGiven the following demand schedule for a monopolist in the diamond industry, assume the marginal cost of producing diamonds is constant and equal to 200 and that there are no fixed costs. Quantity 1 2 3 4 5 Price $500 400 300 200 100 Suppose that rival producers enter the market and the market becomes perfectly competitive. How large is the deadweight loss associated with monopoly in this case? Explain the excess capacity problem. (Note: I am not asking for a definition. I want an explanation of the problem.) Explain what is meant when we say that monopolistic competition is a "second-best" outcome. (Note: I am not asking for a definition. I want an explanation of the problem.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage LearningExploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc