A monopolist with a straight-line demand curve finds that it can sell 2 unit at 12...

A monopolist with a straight-line demand curve finds that it can sell 2 unit at 12 dollar each or 12 unit at 2 dollar each. Its marginal cost is constant at 3 dollar per unit. Draw the MR, and MC curves for this monoply

Solutions

Expert Solution

Given the two points on the demand curve (2,12) and (12,2), we can find the demand equation as:

Q- 12 = (2-12)/(12-2) (P-2)

which gives P = 14 - Q

Total revenue = P. Q = (14-Q)Q = 14Q - Q^2

and MR = dTR/dQ = 14-2Q

Thus, the MR and MC curves are depicted graphically as follows:

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

A monopolist serves market A with an inverse demand curve of P = 12 – Q....

A monopolist serves market A with an inverse demand curve of P = 12 – Q. The marginal cost is constant at $2. Suppose the monopolist uses a two-part tariff pricing. What price does the monopolist set? What is the entrance fee? What is the deadweight loss? What is consumer surplus?

1. A monopolist serves market A with an inverse demand curve of P = 12 -...

1. A monopolist serves market A with an inverse demand curve of P = 12 - Q. Another monopolist serves market B with an inverse demand curve of P = 22 - 2Q. Suppose that both monopolists have a constant marginal cost of $2. What is the producer surplus earned by the monopolist serving market A? 2. A monopolist serves market A with an inverse demand curve of P = 12 - Q. Another monopolist serves market B with an...

Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? ^−3 . a) Assume...

Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? ^−3 . a) Assume that the total cost function is ??(?) = 5 + 4?. Use the inverse elasticity pricing rule (IEPR) to obtain the profit maximizing price that this monopolist should charge. b) How would your result in part (a) change if the demand curve changes to ?(?) = 12? ^−5 , but still assuming the same cost function as in part (a)? Interpret your answer. c)...

Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? −3 . a) Assume...

Consider a monopolist facing a constant elasticity demand curve ?(?) = 12? −3 . a) Assume that the total cost function is ??(?) = 5 + 4?. Use the inverse elasticity pricing rule (IEPR) to obtain the profit maximizing price that this monopolist should charge. b) How would your result in part (a) change if the demand curve changes to ?(?) = 12? −5 , but still assuming the same cost function as in part (a)? Interpret your answer. c)...

2. The inverse demand curve of a monopolist is given by: P = 200 −...

2. The inverse demand curve of a monopolist is given by: P = 200 − Q and the marginal cost is constant at $10, how does charging the monopoly a specific tax of τ=$12 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes the tax revenue)? Calculate the following: equilibrium price and quantity before the tax equilibrium price and quantity after the tax the change in consumer surplus the...

1.If a demand curve is a straight downward-sloping line, which of the following is true A....

1.If a demand curve is a straight downward-sloping line, which of the following is true A. The elasticity varies along the line B. The elasticity is constant along the line. C. The elasticity is inelastic along the line. D. The elasticity is perfectly elastic along the line. 2. The income elasticity for Good A is 0.7, and its cross elasticity with Good B is 0.7. What should we conclude about Good A? A. It is a normal good and a...

Given the demand curve for a monopolist: Qd= 60 -2 P and the marginal revenue curve:...

Given the demand curve for a monopolist: Qd= 60 -2 P and the marginal revenue curve: MR = 30 -Q. Marginal cost equals average cost at $14. What is the price and quantity that the profit-maximizing monopolist will produce? Graph these curves andlabel theequilibrium points. b) Ifthis were a competitive industry, what price and quantity would be produced? Show this on the above graphand show your work (answers) below. c) What is the monopolist's profit? What is the consumer surplus...

For a straight-line downward-sloping demand curve, price elasticity of demand a. increases as we move down...

For a straight-line downward-sloping demand curve, price elasticity of demand a. increases as we move down along the demand curve from higher to lower prices. b. decreases as we move down along the demand curve from higher to lower prices. c. remains constant along the entire demand curve. d. a or b depending on the actual slope of the demand curve

Moving upward and to the left along a downward sloping straight line demand curve, price elasticity...

Moving upward and to the left along a downward sloping straight line demand curve, price elasticity of demand is a. becoming more elastic continuously. b. constant. c. becoming more elastic to the midpoint of the demand curve and then becoming more inelastic. d. becoming more inelastic continuously.

2 a.) Draw the demand, marginal revenue and marginal cost curve for a monopolist. Show the...

2 a.) Draw the demand, marginal revenue and marginal cost curve for a monopolist. Show the equilibrium price and quantity supplied and total profit. Show the equilibrium price and quantity supplied and total profit. b.) Suppose new policy suggest the government can imposed a tax on monopolists equal to 25 percent of their economic profits, how this affect the output level of the firm? How about the price? Explain.

Subjects