Question

In: Economics

Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells...

Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells output in a domestic market and exports to a foreign market as well. The domestic market demand curve given as ??(?)=20−2?? and the foreign market demand curve is given as ??(?)=20−??. Total output is ?=??+??. The monopolist faces a cost function given by ?=12?2+20.

a) Derive the firm’s marginal cost and average cost functions and draw these on a diagram. Clearly label the axes and the curves. [3 marks]

b) Derive the firm’s marginal revenue functions. Draw the marginal revenue and the market demand functions on the diagram. Clearly label the curves. [4 marks]

Note: If it is easier, you may use separate graphs for the domestic market and the foreign market.

c) Without doing any calculations, will it be optimal for the monopolist to sell its output at the same price in both markets? Explain. [1 mark]

d) Write down the profit maximisation problem faced by the monopoly. What output will be supplied to each market? What price will the monopolist will charge in each market? Clearly label these output levels and prices on your graph. [6 marks]

Solutions

Expert Solution

Explanation:-

If you have any dought about this answer dont give dislike ,tell us your dought in the comment then i can explain, Please rate me by giving me a like or thumb because it motivates me to do more work,Thank you.


Related Solutions

Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells...
Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells output in a domestic market and exports to a foreign market as well. The domestic market demand curve given as ??(?) = 20 − 2?? and the foreign market demand curve is given as ?? (?) = 20 − ??. Total output is ? = ?? + ??. The monopolist faces a cost function given by ? = 0.5y2+20 e) What type of price...
Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells...
Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells output in a domestic market and exports to a foreign market as well. The domestic market demand curve given as ??(?) = 20 − 2?? and the foreign market demand curve is given as ?? (?) = 20 − ??. Total output is ? = ?? + ??. The monopolist faces a cost function given by ? = 1/2 ?2 + 20. a) Derive...
Problem 4 [23 marks] Consider a profit-maximising firm that has the good fortune of being a...
Problem 4 [23 marks] Consider a profit-maximising firm that has the good fortune of being a monopolist. The firm sells output in a domestic market and exports to a foreign market as well. The domestic market demand curve given as ??(?) = 20 − 2?? and the foreign market demand curve is given as ??(?) = 20 − ??. Total output is ? = ?? + ??. The monopolist faces a cost function given by ? = 1 2 ?2...
Consider a market with a monopolist and a firm that is considering entry. The new firm...
Consider a market with a monopolist and a firm that is considering entry. The new firm knows that if the monopolist “fights” (i.e., set a low price after the entrant comes in), the new firm will lose money. If the monopolist accommodates (continues to charge a high price), the new firm will make a profit. (a) Is the monopolist’s threat to charge a low price credible? That is, if the entrant has come in, would it make sense for the...
A firm sells a good that is perceived by consumers as a necessity. It also has...
A firm sells a good that is perceived by consumers as a necessity. It also has few substitutes. This good is likely to have demand that is _______ and the price elasticity of demand (in absolute value) would be _______. a. elastic, less than one b. inelastic, greater than one c. inelastic, less than one d. elastic, greater than one Assume there is a decrease in the price of a complement and a decrease in the price of a substitute...
A firm sells a good that is perceived by consumers as a necessity. It also has...
A firm sells a good that is perceived by consumers as a necessity. It also has few substitutes. This good is likely to have demand that is _______ and the price elasticity of demand (in absolute value) would be _______. a. elastic, less than one b. inelastic, greater than one c. inelastic, less than one d. elastic, greater than one Assume there is a decrease in the price of a complement and a decrease in the price of a substitute...
(b) Ahmad’s business is a profit-maximising, perfectly competitive firm. He mows lawns for $20 each. His...
(b) Ahmad’s business is a profit-maximising, perfectly competitive firm. He mows lawns for $20 each. His total cost each day is $220, of which $40 is a fixed cost. He mows 10 lawns a day. (i) What is Ahmad’s profit/loss per day if he shuts down? (1.5 marks) (ii) What is Ahmad’s profit/loss per day if he does not shut down? (1.5 marks) (iii) What can you say about Ahmad’s short-run decision regarding shutdown? Explain your answer. (1.5 marks) (iv)...
Describe the difference in economic profit between a competitive firm and a monopolist in both the...
Describe the difference in economic profit between a competitive firm and a monopolist in both the short and long run. Which should take longer to reach the long-run equilibrium? In the short run, both monopolists and competitive firms ______(Can/Cannot) earn positive economic profits. In the long run,__________(neither/monopolists, but not competitive/both/ competitive but not monopolists) can earn a positive economic profit. True or False: The adjustment to long-run equilibrium takes the same amount of time for monopolies and competitive industries.
Consider an economy consisting of exactly two firms A and B. Firm A sells Good X...
Consider an economy consisting of exactly two firms A and B. Firm A sells Good X to Firm B and to the public. Firm B produces and sells Good Y for which Good X is an input. Each firm’s costs and revenues for one year are given below. Firm A Wages = 25,500      Taxes = 7,500      Sales of X to Public = 15,500      Sales of X to Firm B = 29,000   Firm B    Wages = 35,000  ...
Suppose a monopolist sells its good to three people. Each person can only purchase one good....
Suppose a monopolist sells its good to three people. Each person can only purchase one good. The first person is willing to pay $20 for the good, the second person is willing to pay $18, and the third is willing to pay $16. These three people make up the entire market for this monopolist. If the firm can perfectly price discriminate, how much revenue can it earn from selling 3 units? $48 $60 $54 $16 $12 Which of the following...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT