Suppose the market inverse demand function for rubbing alcohol is p = 120 – q. a....

Suppose the market inverse demand function for rubbing alcohol is p = 120 – q. a. What is the consumer surplus if the price is $30? b. Now suppose the price increases to $40. i. What is the reduction in consumer surplus coming from existing buyers who are still able to purchase rubbing alcohol at $40? ii. What is the reduction in consumer surplus coming from buyers who can no longer purchase rubbing alcohol at $40, but were able to at $30? iii. Graph the demand function and shade the areas corresponding to CS when p = 30 and when p = 40.

Expert Solution

Consumer Surplus is the difference between the price consumer is willing to pay and the price the consumer actually pay. We use basic geometric properties of triangle and rectangle to solve numerical problem regarding consumer Surplus.

Rahul Sunny answered 1 year ago

A monopoly has an inverse demand function given by p = 120 - Q and a...

A monopoly has an inverse demand function given by p = 120 - Q and a constant marginal cost of 10. a) Graph the demand, marginal revenue, and marginal cost curves. b) Calculate the deadweight loss and indicate the area of the deadweight loss on the graph. c) If this monopolist were to practice perfect price discrimination, what would be the quantity produced? d) Calculate consumer surplus, producer surplus, and deadweight loss for this monopolist under perfect price discrimination.

Suppose that the demand curve for new cars is Q = 120 - P (making inverse...

Suppose that the demand curve for new cars is Q = 120 - P (making inverse demand P = 120 - Q) and the supply curve cost is horizontal at $24 per car. a. What is the equilibrium price and quantity of cars? b. Now suppose that each car produces one unit of smog, that imposes an external cost of EC = 0.01s 2 . Total social costs are now the sum of the $24 in production costs and the...

The market (inverse) demand function for a homogenous good is P(Q) = 10 – Q. There...

The market (inverse) demand function for a homogenous good is P(Q) = 10 – Q. There are three firms: firm 1 and 2 each have a total cost of Ci(qi) = 4qi for i ∈ {1.2}. and firm 3 has a total cost of C3(q3) = 2q3. The three firms compete by setting their quantities of production, and the price of the good is determined by a market demand function given the total quantity. Calculate the Nash equilibrium in this...

Suppose in a Perfect Competitive market the demand function is p=120−q and the supply function is p=40+q. Calculate total welfare.

For a Monopolist, the inverse demand function is P=80 – Q (Or, the Demand function is...

For a Monopolist, the inverse demand function is P=80 – Q (Or, the Demand function is Q = 80 – P, if you prefer). The firm’s total cost function is 20 + 5Q + .5Q2. Identify profit maximizing quantity and price Q = _____, P = _____ Graph the relevant curves in the area provided (Hint: If you have difficulty drawing the graph, try plotting a couple of points along the curve) Identify CS and PS in the graph Calculate...

Suppose that the incumbent firm faces an inverse demand function P = 110 − Q, and...

Suppose that the incumbent firm faces an inverse demand function P = 110 − Q, and has a constant marginal cost equal to 10. The potential entrant has a constant marginal cost equal to 10 and a fixed cost of 100. The incumbent firm first determines its quantity and commit to this amount. The potential entrant then determines whether it would enter and the quantity. Given that the entrant enters and the incumbent's quantity q1, the entrant's optimal strategy? What...

Consider a market where the inverse demand function is p =100 – Q, Q = q1+q2....

Consider a market where the inverse demand function is p =100 – Q, Q = q1+q2. Both firms in the market have a constant marginal cost of $10 and no fixed costs. Suppose these two firms are engaged in Cournot competition. Now answer the following questions: a) Define best response function. Find the best response function for each firm. b) Find Cournot-Nash equilibrium quantities and price. c) Compare Cournot solution with monopoly and perfect competitive solutions.

Q: A homogenous-good duopoly faces an inverse market demand function of P = 57 – Q....

Q: A homogenous-good duopoly faces an inverse market demand function of P = 57 – Q. Firm 1 has a constant marginal cost of MC1 = 10. Firm 2’s constant marginal cost is MC2 = 6. Calculate the output of each firm, market output, and price for a Nash-Cournot equilibrium. Draw the best response functions for each firm. Show the solution steps please

The inverse market demand curve for a good is p = 120 – 0.25Q and the...

The inverse market demand curve for a good is p = 120 – 0.25Q and the inverse market supply curve for the good is p = 50 + 0.45Q. Calculate the equilibrium price and quantity, consumer surplus and producer surplus.

Consider a market where the inverse demand function is P = 100 - Q. All firms...

Consider a market where the inverse demand function is P = 100 - Q. All firms in the market have a constant marginal cost of $10, and no fixed costs. Compare the deadweight loss in a monopoly, a Cournot duopoly with identical firms, and a Bertrand duopoly with homogeneous products.

Question