ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 9, Problem 3P
A
To determine
For a
Profit maximization condition and its price and output level.
B
To determine
For a monopoly,
Reason behind MR
C
To determine
For a monopoly,
Show
D
To determine
For a monopoly,
If Greeks decide to charge royalty fee per ring from Manufacturer, what would happen to price and output.
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2. Suppose the cost function for a monopoly is given by TC =F+c.q where TC is the total
cost, F is the fixed cost and q is the output of the firm. The demand function for the
monopoly is given by q = A-bP where A > 0 and b > 0. Find out the profit maximizing
price, quantity, and profit for the monopoly. Also find out the expression for the marginal
revenue of the monopoly as well as the elasticity of demand facing the monopoly.
Q5.
The graph below represents a monopoly firm. Answer the questions below. (
a. Briefly explain three ways in which pricing can be set with a regulated monopoly and the intended objective of each pricing method.b. Based on the diagram, if this monopoly firm is unregulated, what will be its profit? Show your calculations.c. Based on the diagram, if this firm is regulated based on social interest theory, what will be its profit? Show and explain your calculations.d. Based on the diagram, if this monopoly is subject to rate of return regulation, what will be the new price, output and profit of the firm? Show your calculations with explanations.e. Based on the diagram, if this is a natural monopoly that is allowed to set its price, what will be the minimum it should set in order to make a profit or break even? Explain your answer.
6. In the following figure, if the monopoly firm races ATC₁, which rectangle measures total profit? If the monopoly firm faces ATC₂ what is the total profit? What information would you need in order to know whether the monopoly firm will shut down or continue producing in the short run? In the long run?
Chapter 9 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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Similar questions
- (a) If you are the owner of the only bookstore in a small town, do you have a monopoly? Explain. (b) Draw graph and explain the inefficiency of a monopoly firm such as public sector provision of electricity.arrow_forwardDraw the demand curve, marginal revenue, and marginal cost curves from Figure : , and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose the demand for the monopoly’s product increases dramatically. Draw the new demand curve. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. What do you think about the result? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward#9arrow_forward
- The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinational enterprise that supplies Hi-tech components. Use the graph to answer the questions that follow. "image" i. State the elasticity of the monopoly firm demand curve. ii. Considering the figure, examine the benefits of the characteristics of themonopoly demand curve to ABC Inc. Ltd. iii. Suppose the demand and cost curves result in ABC Inc. Ltd earning aneconomic profit. Do you think ABC Inc. Ltd firm will earn profit in the longrun? Explain your answer. Assume all factors constant. iv. Examine the effects of ABC Inc. Ltd on consumers.arrow_forward1.) Define the following: a.)What is a barrier entry? b.) What is natural monopoly? c.) What is legal monopoly? d.) What is predatory pricing?arrow_forward5.arrow_forward
- 1. The market demand for monopoly firm is P=300-4Q and the total cost is C(Q)=50Q+Q?+100. a) How many products this firm should produce in order to maximize its profit and at what price? Calculate profit. Show the profit area on a graph. b) Calculate the consumer, producer surplus and the deadweight loss. c) What will happen to the deadweight loss if the demand increases by 10 units and the demand curve shifts to the right? Calculate the profit with new demand function.arrow_forwardA monopolist is faced with the following cost and revenue curves:(picture) a.What is the maximum-profit price and output,total revenue, total cost and profit? b.If the monopolist were ordered to produce 300 units, what would be the market price and how much profit would now be made c.If the monopolist were faced with the same demand, but average costs were constant at £60 per unit, what output would maximise profit? What would be the price now?................................................................................................. (j) How much profit would now be made? ................................................................................... (k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of £40. How much will now be sold? .................................................................................................................................................. (l) What is the marginal revenue at this…arrow_forward18. What does it mean when a company is a monopoly? Hard to join the market, usually only one company that controls prices within the market. What is this? Monopoly is just a board game? I always win. Companies are exempt from government regulations or assistance. Companies do not have to pay federal taxes when it comes to tax season.arrow_forward
- B. What price will Putrid charge for the profit-maximizing level of output?arrow_forwardQuestion 4 The diagram below illustrates a monopoly firm: (a) Label the curves Curve I, Curve II, Curve III, Curve IV. (b) Graphically identify profit maximizing output and price (c) Explain how the amount of profit is defined at the maximum-profit output.arrow_forwardQuestion 5 The following figure describes the market demand curve of a monopoly market: 10 Price, cost 9 8 7 6 3 2 1 a. b. C. d. 5 10 15 20 25 30 35 D a). 45 50 55 60 65 70 75 80 85 quantity Draw the marginal revenue (MR) curve for the monopoly given the above market demand curve. If the monopoly firm can produce any output level with the extra cost $3 per unit, how would the marginal cost (MC) curve be? List the mathematical equation and draw the MC curve on the same figure of question The fixed cost for the monopoly company is $25. Find the optimal output level and the related profit/loss for it. There are two proposals concerning the market efficiency: Plan A: regulate the market price at $4. Plan B: allow and help the monopoly enforce the perfect price discrimination. If you represent consumers to vote for one plan, which one would you choose? Explain with proper calculation (Hint: consumers only care about their welfare).arrow_forward
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