12. Suppose a monopoly firm faces the market demand Q = 500 – p and has...

12. Suppose a monopoly firm faces the market demand Q = 500 – p and has cost function C = 100 + Q2 . Find the firm’s profit, CS, PS, and DWL for the following scenarios:

a. The monopoly firm charges a single price

b. The monopoly firm perfectly price discriminate

c. The monopoly firm adopts a block-pricing schedule with 2 quantity blocks

Expert Solution

Rahul Sunny answered 7 months ago

A monopoly faces market demand Q = 30−P and has a cost function C(Q) = Q^2...

A monopoly faces market demand Q = 30−P and has a cost function C(Q) = Q^2 (a) Find the profit maximizing price and quantity and the resulting profit to the monopoly. (b) What is the socially optimal price? Calculate the deadweight loss (DWL) due to the monopolist behavior of this firm. Calculate consumer surplus (CS) and producer surplus (PS) given the profit maximizing price. (c) Assume that the government puts a price ceiling on the monopolist at P =22. How...

x A monopoly faces the demand curve P = 110 — Q and has the cost...

x A monopoly faces the demand curve P = 110 — Q and has the cost function C (Q) = 10Q + Q2. Compare the total Q, profits, producer surplus, consumer surplus and DWL compared to perfect competition for: a. single-price monopoly, b. the perfectly price-discriminating monopoly, c. and a quantity-discriminating monopoly (block pricing) by considering one possible price schedule: sell its first 25 units (Q1) at P1 = 85 and sell an additional (Q2 — Q1) = —235 units...

3. Suppose a monopoly firm faces demand for its product of ? = 12 − 2?...

3. Suppose a monopoly firm faces demand for its product of ? = 12 − 2? and has total cost ?? = 8 + 4?. Its production process, however, generates a pollution side effect that imposes a total cost on all others of 2?. a. Before any correction for external costs, identify….the total revenue function of the firm. TR = _________________________________________ b. ... the marginal revenue function of the firm. MR = _________________________________________ c. … the marginal cost function of...

. Suppose a monopoly faces inverse market demand P = 600 – 0.01Q, and that the firm’s...

. Suppose a monopoly faces inverse market demand P = 600 – 0.01Q, and that the firm’s total cost curve is C = 2,500,000 + 10Q + 0.015Q2. Find the firm’s profit-maximizing price and output PM, QMand sketch the equilibrium. Find the firm’s ATC formula. What is the ATC at the output level you found in part a? Add the ATC to your graph and indicate the firm’s profit. What is the total profit? What is the per unit profit at QM? Explain why...

Suppose that the incumbent firm faces an inverse demand function P = 110 − Q, and...

Suppose that the incumbent firm faces an inverse demand function P = 110 − Q, and has a constant marginal cost equal to 10. The potential entrant has a constant marginal cost equal to 10 and a fixed cost of 100. The incumbent firm first determines its quantity and commit to this amount. The potential entrant then determines whether it would enter and the quantity. Given that the entrant enters and the incumbent's quantity q1, the entrant's optimal strategy? What...

A monopoly faces the demand curve P = 100 -.01Q, where P is price and Q...

A monopoly faces the demand curve P = 100 -.01Q, where P is price and Q is weekly production measured in cents per unit. The firm’s cost function is C = 50Q + 20,000. Assuming the firm maximizes profit,a. What is the level of production, price, and total profit per week?b. If the government decides to put a tax of 20 cents per unit ON THE BUYERS of this product, what will be the new level of production, price the...

If a monopoly faces an inverse demand curve of p equals=390390minus−Q, has a constant marginal and...

If a monopoly faces an inverse demand curve of p equals=390390minus−Q, has a constant marginal and average cost of $30, and can perfectly price discriminate, what is its profit? What are the consumer surplus, welfare, and deadweight loss? How would these results change if the firm were a single-price monopoly?

Consider a monopoly firm facing a demand curve Q = 100 – P. This firm has...

Consider a monopoly firm facing a demand curve Q = 100 – P. This firm has fixed costs =$1000 and constant marginal cost =$20. Total costs are $1000 + $20Q and average costs are $1000/Q + $20. a. What is the firm’s profit maximizing level of output? What price does it charge to sell this amount of output? How much profit does it make? What is consumer surplus at this level of output? Show your work.(8) b. Suppose this firm...

Suppose the firm is a monopolist. It faces a downward-sloping demand curve, P(Q). If it also...

Suppose the firm is a monopolist. It faces a downward-sloping demand curve, P(Q). If it also has non-negative marginal cost, will it choose a quantity on the demand curve where the price elasticity of demand is less than, greater than, or equal to -1? Explain. Two Hints: First, recall that R(Q) = P(Q) times Q, and that the price elasticity of demand is defined as . Second, recall the condition MR = MC. Think about how the firm’s revenue will...

Suppose a profit-maximizing monopoly firm has short-run total cost function TC(Q)=5Q+300. It faces market demand Q=400-4P....

Suppose a profit-maximizing monopoly firm has short-run total cost function TC(Q)=5Q+300. It faces market demand Q=400-4P. What price will it charge and what quantity will it sell if it acts as a one-price monopolist? If the firm wishes to sell output in two different blocks at different prices, what are the prices it will charge and how much will it sell in each block?

Question