Suppose one market has a demand curve ?(?) = 100 − ?? （1）If this market has...

Suppose one market has a demand curve ?(?) = 100 − ??

（1）If this market has many firms supplying the identical products to the consumers, and the industry has a cost function ?(?) = 2? ^2. What are the market equilibrium price and quantity?

（2）What is the price elasticity of demand at the market equilibrium in (1)?

（3）If this market has only one firm supplying the products, with cost function ?(?) = 2?^2. What are the market equilibrium price and quantity now

（4）What is the price elasticity of demand at the market equilibrium in (3)? What can we conclude about the monopoly's profit-maximizing behavior regarding the price elasticity of demand?

（5）Illustrate consumer surplus, producer surplus and the total social welfare (total surplus) for the two cases. Based on your comparison, discuss the arguments for and/or against the monopoly.

Expert Solution

Rahul Sunny answered 6 months ago

Suppose that the retail market for widgets has inverse demand curve P = 100 – Q....

Suppose that the retail market for widgets has inverse demand curve P = 100 – Q. Widget retailing is controlled by a monopoly retailer, R Inc., which obtains its widgets from the monopoly wholesaler W Inc. at a wholesale price of w per widget. In addition R Inc. incurs a cost of $2 per widget to promote the product and sell to consumers. Wholesaler W Inc. obtains the widgets in from monopoly manufacturer M Ltd. at a manufacturing price of...

1. Suppose the Demand curve for heaters is P = 100 – Q. Suppose firms face...

1. Suppose the Demand curve for heaters is P = 100 – Q. Suppose firms face a constant Marginal Cost of $20 per heater. In perfect competition (part 2 of the class) we learned that the competitive price of heaters would be $20 (with constant MC, MC = AC). What would the monopoly price and quantity of heaters be? Compare the welfare of these two markets (consumer surplus, producer surplus, and deadweight loss). (2 pts)

1. Suppose a market is described by demand P = 100 - 2Q and there are...

1. Suppose a market is described by demand P = 100 - 2Q and there are two firms engaged in Stackelberg Competition each with a MC = 10 What is the consumer surplus in this market (Round market output to the nearest integer)? 1. 828 2. 1916 3. 1156 4. 1811

A monopolist faces a market demand curve given by QD= 100 – P/3 and has a...

A monopolist faces a market demand curve given by QD= 100 – P/3 and has a cost function described by C = 30Q +1.5Q2. Solve for the monopolist’s profit maximizing output and price. With reference to question 4 above, suppose the demand facing the monopolist increases to QD= 120 – P/2. Solve for the new profit maximizing values of price and quantity. Describe how the two answers differ and explain those differences in terms of the demand change. The market...

Suppose that in a particular market, the demand curve is highly elastic, and the supply curve...

Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. If a tax is imposed in this market, then the Question 25 options: buyers will bear a greater burden of the tax than the sellers. sellers will bear a greater burden of the tax than the buyers. buyers and sellers are likely to share the burden of the tax equally. buyers and sellers will not share the burden equally, but it...

Suppose the demand curve and the supply curve in a market are both linear. To begin,...

Suppose the demand curve and the supply curve in a market are both linear. To begin, there was a $5 tax per unit, and the $5 tax resulted in a deadweight loss of $1,500. Now, the tax per unit is higher, with the higher tax resulting in a deadweight loss of $6,000. What is the amount of the new tax per unit?

Suppose there is a competitive market with 30 consumers, each of which has a demand curve...

Suppose there is a competitive market with 30 consumers, each of which has a demand curve given by P = 20 – 10Q, and 30 suppliers, each of which has a supply curve given by P=10Q. a. Derive equations for the aggregate demand and supply curves. b. Find the market equilibrium price and quantity using your answer to part (a). c. What are the net benefits (consumer plus producer surplus) of the market allocation in part (b)? d. What would...

Suppose Jim has a demand curve of: QJd=8 − p, and Sam has a demand curve...

Suppose Jim has a demand curve of: QJd=8 − p, and Sam has a demand curve of: QSd=6 − 0.5p. How much is the total demand at a price of $8.50? unit(s) (round your answer to two decimal places). How much is total demand at a price of$7.00? unit(s)(round your answer to two decimal places).

Suppose a perfectly competitive labor market has a demand curve of LD = 120 − 2w...

Suppose a perfectly competitive labor market has a demand curve of LD = 120 − 2w and a supply curve of LS = 8w, where w is the wage rate is dollars per hour and L is the quantity of labor in person-hours. (a) (2 points) What are the equilibrium values of the wage and employment? (b) (4 points) Suppose the government imposed a minimum wage of $14 per hour. Now what are the equilibrium values of the wage and...

The market demand curve is given by p = 100 - Q Two firms, A and...

The market demand curve is given by p = 100 - Q Two firms, A and B, are competing in the Cournot fashion. Both firms have the constant marginal cost of 70. Suppose firm A receives a new innovation which reduces its marginal cost to c. Find the cutoff value of c which makes this innovation "drastic".

Question