MICROECONOMICS W/CONNECT >IC<
20th Edition
ISBN: 9781259890031
Author: McConnell
Publisher: MCG
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Chapter 19, Problem 3DQ
To determine
Enforcement of antitrust law.
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4. You are the manager of a monopoly, and your demand and cost functions are given by P = 300 − 3Q and C(Q) = 1,500 + 2Q2, respectively. (LO3, LO4)
a. What price–quantity combination maximizes your firm’s profits?
b. Calculate the maximum profits.
c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price–quantity combination?
d. What price–quantity combination maximizes revenue?
e. Calculate the maximum revenues.
f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price–quantity combination?
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.…
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?
3
1. Describe the bidding process by which the electricity generation sector provides electricity to pooling and balancing authorities. Additionally, show this process by building an electricity supply curve.
a. What antitrust and regulation concerns are present at the wholesale stage of the electricity market?
b. Describe a market design that reduces market manipulation in wholesale electricity markets. Show that the Nash equilibrium under this market design will result in generators bidding their true marginal cost of production.
c. Describe a vertically integrated industry as it pertains to the electricity sector.
d. Describe non-linear (two part) pricing as it pertains to retail electricity sales. What is the
purpose of this pricing system?
Chapter 19 Solutions
MICROECONOMICS W/CONNECT >IC<
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