Assume that a monopolist is able to sell rocks in two separate markets, market A and...

Assume that a monopolist is able to sell rocks in two separate markets, market A and market B. Assume that there is no trade between these markets. Assume that the monopolist has a constant marginal cost of $10. Assume that the demand curve for rocks in market A is as follows: P=200-Q

Assume that the demand curve for rocks in market B is as follows: P=100-2Q

1. In order to maximize profits, what price will the monopolist charge in each market?

2. What is output in each market?

3. What are profits for the monopolist in each market?

Expert Solution

Rahul Sunny answered 2 years ago

.A price-discriminating monopolist sells in two separate markets such that goods sold in one market are...

.A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = £4 in one market and p2 = £8 in the other market. At these prices, the price elasticity in the first market is –0.90 and the price elasticity in the second market is –1.30. Which of the following actions is sure to raise the monopolist’s profits? a. Raise p1. b. Raise p1 and lower p2....

A monopolist produces for two, geographically distinct markets. The demand in market A is qA =...

A monopolist produces for two, geographically distinct markets. The demand in market A is qA = 72−3p and the demand in market B is qB = 40 − 2p. The firm’s total cost function is C(qA + qB) = 5 + 2(qA + qB). The cost of transporting a good between the two markets is t. a. Suppose that transportation cost is t = 0. Find the price in each market that maximizes the monopolist’s profits. What are the corresponding...

Another monopolist has constant marginal costs of 10,000 SEK per unit, and faces two separate markets...

Another monopolist has constant marginal costs of 10,000 SEK per unit, and faces two separate markets that allow price discrimination, with the (inverse) demand functions: p(a) = 40000 - 20q and p(b) = 25000 - 50Q What pricing maximizes profits?

Describe the effects of a monopolist choosing to discriminate between two markets (assume a starting condition...

Describe the effects of a monopolist choosing to discriminate between two markets (assume a starting condition of equal prices in both markets). Is it always possible to profit from this kind of discrimination? Does elasticity matter? How should quantities be adjusted?

A monopolistic firm operates in two separate markets. No trade is possible between market A and...

A monopolistic firm operates in two separate markets. No trade is possible between market A and market B. The firm has calculated the demand functions for each market as follows: Market A p = 15 - Q; Market B p = 11 - Q The company estimates its total cost function to be TC = 4Q. Calculate the following: quantity, total revenue, and profit when the company maximizes its profit and charges the same price in both markets quantity, total...

Suppose a monopolist faces two markets with the following demand curves: Market 1: ?1 (?1 )...

Suppose a monopolist faces two markets with the following demand curves: Market 1: ?1 (?1 ) = 500 − ?1 Market 2: ?2 (?2 ) = 800 − 4?2 Let the marginal cost be $2 per unit in both markets. A) If the monopolist can price discriminate, what should be ?1 and ?2 to maximize the monopolist’s profit? B) What is the profit-maximizing price if the government requires the monopolist to charge the same price in each market? C) How...

4. Suppose a monopolist faces two markets with the following demand curves: Market 1: ?1(?1) =...

4. Suppose a monopolist faces two markets with the following demand curves: Market 1: ?1(?1) = 400 − 2?1 Market 2: ?2(?2) = 1000 − 4?2 Let the marginal cost be $20 per unit in both markets. If the monopolist can price discriminate, what should be ?1 and ?2 to maximize the monopolist’s profit?

Consider the “Robinson Crusoe” economy with two markets - product market and labor market. Assume the...

Consider the “Robinson Crusoe” economy with two markets - product market and labor market. Assume the utility function of the consumer is given by ? = ?(?, ?), where ? denotes consumption and ? stands for leisure, and the production technology is given by ? = ?(?), where ? is output and ? denotes labour input. Furthermore, assume the price of the consumer good to be equal to one, and the price of labour equal to wage rate, ?, and...

A firm sells in two separate markets, A and B. The demand functions in the two...

A firm sells in two separate markets, A and B. The demand functions in the two Markets are: Qa=4,000-50Pa and Qb=3,200-160pB. The total Marginal revenue function is: 1. MRT=_____________________ 2. If the firm wants to produce 3,200 units of output, in order to maximize revenue from this output it should produce_____units in plant A and_____units in B. 3. The firm wishes to practice price price discrimination. The firm's marginal cost functions is MC=12.58+0.004Qt a. To Maximize profit the firm would...

Suppose that there is only one ﬁrm, the monopolist and many consumers in the market. Assume...

Suppose that there is only one ﬁrm, the monopolist and many consumers in the market. Assume that the market demand function is given by P = 210−2Qd and the monopolist’s cost function is given by C(Q) = 10Q. (a) Setup the monopolist’s proﬁt maximization problem. (b) Solve the monopolist’s proﬁt maximization problem and ﬁnd the market equilibrium price P∗ and quantity Q∗. Now, assume that the government eliminates all the entry cost of entering the market as the government wants...

Question