The global demand for cocoa can be represented with the following equation: P=50 - 0.25Q, where...

The global demand for cocoa can be represented with the following equation:

P=50 - 0.25Q, where P is the price (dollars per 100 lbs.), and Q is quantity. Furthermore, assume that cocoa can be produced at a constant marginal and average cost of $10 per unit of Q.

Cocoa producers have formed a cartel, aimed at realizing the monopoly price for cocoa.

Given the demand equation and marginal cost specified above, what is the monopoly price and quantity?

The monopoly sets MC=MR for profit maximization

MR = twice the slope of the demand curve

MR = 50-0.50Q

MC = 10

50-0.50Q = 10

50-10 = 0.50Q

Q = 40/0.50 = 80

P = 50-0.25*80 = 30

In perfect competition, the market price will equal marginal cost. What’s the competitive price and quantity and how does that compare to the monopoly price and quantity?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The global demand for cocoa can be represented with the following equation: P=50 - 0.25Q, where...

The global demand for cocoa can be represented with the following equation: P=50 - 0.25Q, where P is the price (dollars per 100 lbs.), and Q is quantity. Furthermore, assume that cocoa can be produced at a constant marginal and average cost of $10 per unit of Q. Cocoa producers have formed a cartel, aimed at realizing the monopoly price for cocoa. Given the demand equation and marginal cost specified above, what is the monopoly price and quantity?

Assume that the demand for oranges is represented by the equation P = 50 - Qd...

Assume that the demand for oranges is represented by the equation P = 50 - Qd and supply by the equation P = 25 + Qs, where Qd and Qs are quantity demanded and quantity supplied, respectively and P is price. Using the equilibrium condition Qs = Qd, solve the equations to determine the equilibrium price. Now determine equilibrium quantity. Graph both equations. Compute and show graphically consumer surplus and producer surplus if government imposes a price floor of $42....

Assume that the demand for commodity is represented by the equation P=50-Qd and supply by the...

Assume that the demand for commodity is represented by the equation P=50-Qd and supply by the equation P=25+Qs, where Qd and Qs are quantity demanded and quantity supplied, respectively and P is price. a. Compute and show on your graph the DWL if the government subsidizes the consumers of the good ( subsidy=$2/unit) b. Explain the gains from this trade.

Consider a market with a demand curve given (in inverse form) by P(Q)=50−0.25QP(Q)=50−0.25Q, where QQ is...

Consider a market with a demand curve given (in inverse form) by P(Q)=50−0.25QP(Q)=50−0.25Q, where QQ is total market output and PP is the price of the good. Two firms compete in this market by sequentially choosing quantities q1q1 and q2q2 (where q1+q2=Qq1+q2=Q). This is an example of: Choose one: A. Cournot competition. B. Bertrand competition. C. perfect competition. D. Stackelberg competition. Part 2(4 pts) Now suppose the cost of production is constant at $20.00 per unit (and is the same...

I. The demand curve for chocolate can be represented by P = 1,500-10Q, where P is...

I. The demand curve for chocolate can be represented by P = 1,500-10Q, where P is the price per ton (in U.S. dollars), and Q is expressed in tons per year. The private marginal cost of production in the chocolate industry is given by 20Q. But chocolate production causes a nauseating odor to sweep over the city in the vicinity of chocolate factories, so the social marginal cost of production, taking the odor into account, is 30Q a. (3 points)...

10-The demand function for a product is given by p=80-0.5Q and the supply function is p=50+0.25Q,...

10-The demand function for a product is given by p=80-0.5Q and the supply function is p=50+0.25Q, where p is the price and Q is the quantity. Suppose that the government impose a tax of $15 on every unit sold. Find equilibrium price and quantity before imposing the tax. Find price of buyer and seller and the quantity sold in the market after tax. Find the tax burden on buyer and seller. Find government revenue and deadweight loss (DWL) and the...

The demand curve for turnip can be represented by the following equation: ? = 2000 −...

The demand curve for turnip can be represented by the following equation: ? = 2000 − 400? There are only two producers and the marginal cost to produce a turnip is $2 (There is no fixed cost). If the capacity of each firm is 600 output, calculate the price range of turnip under the Bertrand-Edgeworth Model.

Assume that demand for a commodity is represented by the equation P = 10 – 0.2...

Assume that demand for a commodity is represented by the equation P = 10 – 0.2 Q d, and supply by the equation P = 5+ 0.2 Qs where Qd and Q s are quantity demanded and quantity supplied, respectively, and P is the Price. Use the equilibrium condition Qs = Qd a. Solve the equations to determine equilibrium price b. Now determine the equilibrium quantity c. Graph the two equations to substantiate your answers and label these two graphs...

Assume that demand for a commodity is represented by the equation P = 10 – 0.2...

Assume that demand for a commodity is represented by the equation P = 10 – 0.2 Qd, and supply by the equation P = 5 + 0.2 Qs where Qd and Q s are quantity demanded and quantity supplied, respectively, and P is the Price. Use the equilibrium condition Qs = Qd , 1: Solve the equations to determine equilibrium price. 2: Now determine equilibrium quantity. 3: Graph the two equations to substantiate your answers and label these two graphs...

Assume that demand for a commodity is represented by the equation P = 20 – 0.6...

Assume that demand for a commodity is represented by the equation P = 20 – 0.6 Q d, and supply by the equation P = 10 + 0.2 Qs where Qd and Q s are quantity demanded and quantity supplied, respectively, and P is the Price. Use the equilibrium condition Qs = Qd 1: Solve the equations to determine equilibrium price. 2: Now determine equilibrium quantity. 3: Graph the two equations to substantiate your answers and label these two graphs...

Subjects