A monopolist faces two competitive buyers with their individual demands as and separately. Suppose it produces with the constant function. If the monopoly offers the two buyers with same two-part tariff schedule, find its optimal menu of the two-part tariff.
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- If a monopolist attempts to raise its price by a small amount, the quantity that its customers will buy will O increase O remain the same O decrease O None of these choices.A monopolist and a perfectly competitive firm both * O face a downward-sloping demand curve O have their marginal revenue curve below their demand curve. can earn profit in the long run O have a horizontal marginal revenue curve maximize profit by producing the quantity at which marginal revenue equals marginal costThe graph below represents sales per week of ABC Inc. Ltd, a monopoly multinationalenterprise that supplies Hi-tech components. Use the graph to answer the questionsthat follow 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.
- The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinationalenterprise that supplies Hi-tech components. Use the graph to answer the questionsthat follow 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 long run? Explain your answer. Assume all factors constant. iv. Examine the effects of ABC Inc. Ltd on consumers.Suppose a monopoly market has a demand function in whichquantity demanded depends not only on market price (P) butalso on the amount of advertising the firm does (A, measuredin dollars). The specific form of this function isQ =(20 - P2) (1 + 0.1A - 0.01A2).The monopolistic firm’s cost function is given byC = 10Q + 15 + A.a. Suppose there is no advertising (A = 0). What outputwill the profit-maximizing firm choose? What market price will this yield? What will be the monopoly’sprofits?b. Now let the firm also choose its optimal level of advertising expenditure. In this situation, what output levelwill be chosen? What price will this yield? What will thelevel of advertising be? What are the firm’s profits in thiscase? Hint: This can be worked out most easily by assuming the monopoly chooses the profit-maximizing pricerather than quantity.Why is there no supply curve fro a monopolist?
- A natural monopoly exists when one firm can supply an entire market at a lower average total cost than can two or more firms, O a firm can engage in price discrimination. O a monopoly firm faces a horizontal demand curve. O the producers in an industry have formed a cartel. diseconomics of scale cxist in an industry.Consider a monopolist who charges a single price to all of its customers. If this monopolist starts price discriminating, its output will and its profit will Orise; fall O fall; fall Ofall; rise Orise; riseThe graph below represents sales per week of ABC Inc. Ltd, a monopoly multinationalenterprise that supplies Hi-tech components. Use the graph to answer the questionsthat follow.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 long run? Explain your answer. Assume all factors constant.iv. Examine the effects of ABC Inc. Ltd on consumers.
- Consider the relationship between monopoly pricingand price elasticity of demand.a. Explain \\•hy a monopolist will never produce aquantity a t which the demand curve is inelastic.(Hint: If demand is inelastic and the firm raisesits price, what happens to total revenue and totalcosts?)b. Draw a diagram for a monopolist,. preciselylabeling the portion of the demand curve thatis inelastic. (Hint: The answer is related to themarginal-revenue curve.)c. On your diagram, show the quantity and pricethat maximize total revenue.Many schemes for price discrintination involve somecosL For example, discount coupons take up the timeand resources of both the buyer and the seller. Thisquestion considers the implications of costly pricediscrimination. To keep things simple, let's assumethat our monopolist's production costs arc simplyproportional to output so that average total cost andmarginal cost arc constant and equal to each other.CHAPTER 15 MONOPOLY 317a. Draw the cost., demand, and marginal-revenuecurves for the monopolist. Show the pricethe monopolist would charge without pricediscrimination.b. ln your diagram, mark the area equal to the mernopolist's prolit and call it X. Mark the area equalto consumer surplus and call it Y. Mark the areaequal to the deadweight loss and call it Z.c. Now suppose that the monopolist can perfectlyprice discriminate. What is the monopolist'sprofit? (Give your answer in terms of X, Y, and Z.)d. What is the change in the monopolist's prolit fromprice discrimination? What is the…O OO The above graph shows the market demand function for a product. Assume that the market is served by a perfectly-price-discriminating monopolist with a constant marginal cost of production equal to $4 (MC = $4) and no fixed cost (FC = 0). The deadweight loss equals: DWL - $72 DWL - $0 DWL- -$48 DWL - $84 DWL-$36 $30 $28 $26 $24 $22 $20 Question 23 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
