COURSE: MICROECONOMICS 2 - MONOPOLY IN DURABLE GOODS A monopolistic firm has estimated its inverse demand function as P = 200 − 0.5 Q + 40*(1/UL) with a increasing marginal cost (MC) estimated to be 10 Q. (a) Estimate effect on firm's extraordinary profit if it changes useful life (UL) of its product from 8 years to 5 years. b) What will happen to selling price?
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COURSE:
A monopolistic firm has estimated its inverse demand function as P = 200 − 0.5 Q + 40*(1/UL) with a increasing marginal cost (MC) estimated to be 10 Q.
(a) Estimate effect on firm's extraordinary profit if it changes useful life (UL) of its product from 8 years to 5 years.
b) What will happen to selling price?
Step by step
Solved in 3 steps
Doubt: Is extraordinary profit for a monopolist condition as (P - MC) x Q ? This would avoids integration method of marginal cost (MC)
You mentioned Profit = TR - TC, so is true this condition for monopolist??
Can you confirm it. I urgently need these results
The development of exercise is not well seen. I can't get values mentioned, especially extraordinary profit of 56.31.
Can you please send calculations again?
How do you get values of 1,966.54 and 1,910.23?
Thank you :D
- Refer to Figure 1. If the market price is $2, what the firm will do? Enable Editing 4) Use the figure below to answer the following questions. Price and cost (dollars per unit) 80 MC 60 40 ATC 20 MR 20 40 60 80 100 Quantity (units per week) Figure 2 a) Refer to Figure 2 If this firm is in monopolistic competition, what is its output? b) Refer to Figure 2 If this firm is in monopolistic competition, what is the price it will charge? c) Refer to Figure 2. What is the firm profit situation? What time frame equilibrium is the firm? d) Refer to Figure 2. If this firm in monopolistic competition is in short-run equilibrium, and the firm making profit what will happen in the long run to the firm profit? explain2. Monopoly, Practice Question Firm P is a monopolist for a new drug that makes people feel thinner. the total cost function is C(Q) = 200 + 10Q + Q² The inverse demand function is p(Q) = 82 - Q (a) By how much do revenues increase if this firm sells one more (small) unit of output? By how much does its cost go up if it produces one more (small) unit of output? (b) What is the optimal price and quantity the monopolist should charge and sell? (c) What is the profit the monopolist makes? Should the firm shut down in the short or long run? (d) If the company increases its price by a small fraction (let us say 1%), by what proportion does demand go down? [Round to two decimal places.] (e) What percentage of the price is due to costs and what is due to markup? [Round to two decimal places.] (f) What is the deadweight loss of the monopoly pricing compared to competitive prices?1. Consider a monopoly firm with the total cost functionC(q) = 120 + 6qand the inverse market demandp(Q) = 90 − 2Q(a) What quantity will this firm sell? What price will they charge? Whatwill their profit be?(b) What would be the efficient quantity for this monopoly to produce?How much deadweight loss do they create?(c) Do you expect a firm with this sort of cost function to typically be amonopoly? Why or why not?2. Pretend it’s 2005 and people still use iPods. All iPod owners consideronly two options for downloading music to their MP3 players: purchasesongs from iTunes, or copy songs from friends’ CDs (it’s 2005, so peoplestill own CDs, too). With these two options, suppose the weekly inversemarket demand for the song “All These Things That I’ve Done” by TheKillers (remember, it’s 2005) isp = 1.98 − 0.00198QSuppose the marginal cost to Apple of you downloading a song is zero.(a) What is Apple’s optimal price of “All These Things That I’ve Done”?(b) How many downloads of “All These…
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- COURSE: Microeconomics - Perfect Competition, Monopoly and OligopolySuppose a market with 2 firms whose total costs are given by CTi = 10qi, facing a market demand given by: Q = 100 - P.(a) Determine Perfect Competition outcome, its marginal cost (MC), its price and market quantity (q). Graph.(b) Determine outcome of a monopoly, remembering that marginal revenue (MR) will be equal to marginal cost (MC) in this case and that monopolist's profit is (P × Q) - TC. Graph. Then, what difference can be seen by comparing this result with perfect competition result obtained in (a) above?(c) Determine Cournot result with identical firms (equal access) and there is product homogeneity (equal price), remembering to maximize profits of firms, derive them and obtain Reaction Function. Graph(d) Determine Cournot result with product homogeneity (equal price) and different costs such that: CT1=q12 and CT2 = 12q2 What difference do you appreciate with respect to result obtained in (c) above Graph.COURSE: MICROECONOMICS 2 - MONOPOLY AND PRICE DISCRIMINATION TYPE 2 - PRICE PER CONSUMPTION BRACKETA monopolistic firm charges $90 for 30 units sold; $60 for units between 31 and 60 and $30 for units between 61 and 90 and $15 for units greater than 90. Consider marginal cost (MC) equal to zero. How much is firm's extraordinary profit?(a) If it sells 15 units.(b) If it sells 53 units(c) If it sells 95 units PLEASE GRAPHIC EACH CASE6. Consider a monopolist with zero cost, C(Q)= 0, facing two consumers. Con- sumer 1's demand is given by P=8-Q while consumer 2's is P=8-Q. Sup- pose the monopolist can engage in second-degree price discrimination. (a) What menu of quantity-price pairs should it offer to its customers? What's the firm's profit? (b) Suppose that consumer 1's demand is instead given by P=4-1Q. What menu of quantity-price pairs should it offer to its customers? What's the firm's profit?
- ev Quantity, price, total revenue, and total cost for a monopoly firm that produces cement are listed in the table below. Quantity, (Q) (tons) Price (P) Total Revenue (TR) Total Cost (TC) 1 $1,300 $1,300 $900 2 $1,215 $2,430 $980 3 $1,130 $3,390 4 $1,045 $4,180 5 $960 $4,800 6 $875 $5,250 7 $790 $5,530 Determine the firm's profit-maximizing price. Write the exact answer. Do not round. Answer S $1,100 $1,270 $1,510 $1,960 $2,56017 of 16 BNW is one of many producers of luxury wheelchairs, which are differentiated to appeal to different market niches. BNW's Price per chair relevant demand and cost curves are depicted in the graph. $2,000 Average total Use this graph to answer the questions. Assume that there are 1,800 Marginal cost no significant barriers to entry. cost 1,600 Determine BNW's profit-maximizing price and quantity. 1,400 1,200 1,000 price per chair: $ 800 600 400 quantity of chairs: chairs 200 Demand Marginal revenue 100 200 300 400 500 600 700 800 900 Calculate BNW's profit. Chairs per week BNW's profit: $Please no written by hand solutions 1. Assume the cost function for a monopolist is given by TC(q) = 30Q; the inverse demand function for the firms' output is p = 120 - Q, where Q is the total output. a. Find the profit-maximizing combination of price and quantity b. Estimate consumer surplus, producer surplus and the deadweight loss associated with this monopolist C. If this industry became perfectly competitive, explain and estimate the consumer surplus, producer surplus and deadweight loss of the industry d. Graph your answers for a, b, and c 2. Now assume that the monopolist above splits into two. Each of two firms has the cost function TC(q) = 30q. a. What are the firms' outputs in a Nash equilibrium of Cournot's model? b. Estimate the economic profits for each firm c. If firm 1 is the leader and firm 2 the follower, find the equilibrium outputs for the Stackelberg solution.