Question

In: Economics

Total 20pts. Suppose the firm knows that, there are two types of buyers: ?? = 100...

  1. Total 20pts. Suppose the firm knows that, there are two types of buyers: ?? = 100 − 4?, ?? = 400 − 2?. The firm’s ATC=MC=5.

    1. a) Suppose the firm operates as a single price monopoly (the same price in both markets), what will be the market price, market quantity, and profit? (HINT: You need to find market demand for both type a and type B, Q=Qa+Qb, then solve! Draw diagram for yourself.) (3pts)

    2. b) What will be consumer surplus, producer surplus, and deadweight loss? Draw a graph

      (5pts)

    3. c) Under which conditions can this firm use segmented price discrimination? (2pts)

    4. d) Suppose that the firm conditions from c) hold, what should the firm charge in each

      market? (7pts)

      1. What is output in each market?

      2. What is total market quantity?

      3. What is the firm’s profit?

    5. e) Does segmented price discrimination of the market improve efficiency? Why? (3pts)

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Suppose the firm knows that, there are three types of buyers: ?? = 100 − 4?,??...
Suppose the firm knows that, there are three types of buyers: ?? = 100 − 4?,?? = 400 − 6?, and ?? = 300 − 10?. The firm’s ATC=MC=5. Suppose the firm operates as a single price monopoly, what will be the market price, market quantity, and profit? What will be consumer surplus, producer surplus, and deadweight loss? Draw a graph! Under which conditions can this firm use segmented price discrimination? Suppose that the firm conditions from c) hold, what...
A cinema knows near a university knows that there are two types of consumers: regular people...
A cinema knows near a university knows that there are two types of consumers: regular people and students. Ordinary people have an aggregate demand curveof? = 10−p/3 while students have an aggregate demand curve of? = 10–2p/3. The marginal cost of the cinema is zero. a) Suppose students can be separated from other people by their student id, and the cinema charges each group of consumers a different price. What prices would the cinema charge? b) Suppose the cinema cannot...
A seller faces two buyers: Big and Small. The seller knows the following willingness to pay...
A seller faces two buyers: Big and Small. The seller knows the following willingness to pay values: Big is willing to pay $10 for one unit, $5 for a second unit, $2 for a third unit, and does not want more than three units; Small is willing to pay $6 for one unit and does not want more than one unit. Assume the seller cannot distinguish which buyer is Big and which buyer is Small. Assume resale is impossible. What...
Suppose that there is “dominant” firm with total cost function of c(q) = 100 + 10q...
Suppose that there is “dominant” firm with total cost function of c(q) = 100 + 10q + 0.25q2. It faces a market demand function (inverse) of p = 100 − 0.5Q, where Q indicates total market supply. This dominant firm has to deal with 10 fringe firms, each of whom behaves perfectly competitively. Each fringe firm has a marginal cost function dc(q)/dq = 20q + 25 a) Calculate the supply function of the fringe firms b) Using this, calculate the...
Suppose two firms (Firm 1 and Firm 2) are producing a product. The total demand is:...
Suppose two firms (Firm 1 and Firm 2) are producing a product. The total demand is: Q = 100 – P, where Q = Q1 + Q2. Each of the two firms has the cost function TC = 20Q. Based on the information given, calculate the equilibrium P, Q, Q1, Q2, Profit1 and Profit2 under monopoly (collusion), Cournot, and Stackelberg. For the Stackelberg model, assume that Firm 1 is the leader and Firm 2 is the follower. Show all your...
The publisher of an online newspaper knows that there are two types of customers. ‘students’ and...
The publisher of an online newspaper knows that there are two types of customers. ‘students’ and ‘non-students’. Although they cannot distinguish what type of buyer is actually making a purchase of a subscription, they know the demand curves for each type of buyer. These are given by the following: Students: p = 80 - q Non students: p = 100 - q where is q is the number of articles that are purchased. Assume that the marginal cost of supplying...
1. Suppose a firm has the following total cost function: TC = 100 + 4q^2 a....
1. Suppose a firm has the following total cost function: TC = 100 + 4q^2 a. What is the minimum price necessary for the firm to earn profit? You must explain your reasoning and process as to how your found the price you found. b. Below what price will the firm shut down in the short run?
Please show all work A firm produces two types of products, A and B. The total...
Please show all work A firm produces two types of products, A and B. The total profit, P(x, y), in thousands of dollars, for selling x thousand units of A and y thousand units of B is P(x, y) = –5x2 – 2y2 – 2xy + 24x + 12y – 20. Find the amounts of x and y that maximize P(x, y).      x = ___,     y = ___.
A monopolist knows that there are two types of consumers, “high demand” (H) and low demand...
A monopolist knows that there are two types of consumers, “high demand” (H) and low demand (L) types. Inverse demand for each consumer of the two types is p = 50 − qL and p = 100 − qH . 60% of consumers are of the L type. Marginal cost is zero. a) Find the optimal price if the firm can only set a single price. (One way to do this is to pretend that there are 6 consumers of...
A monopolist knows that there are two types of consumers, “high demand” (H) and low demand...
A monopolist knows that there are two types of consumers, “high demand” (H) and low demand (L) types. Inverse demand for each consumer of the two types is p = 50 − qL and p = 100 − qH . 60% of consumers are of the L type. Marginal cost is zero. a) Find the optimal price if the firm can only set a single price. (One way to do this is to pretend that there are 6 consumers of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT