Question
In: Economics
The Demand for Spring-water is P = 13 - Q, where Q is quantity measured in...
The Demand for Spring-water is P = 13 - Q, where Q is quantity measured in hundreds of bottles per day and P is the price per bottle. Spring-water can be produced at a constant marginal (and average) cost of $1/ bottle. If the industry is perfectly competitive, how much will be produced and at what price in equilibrium? Explain why. Now suppose the industry becomes monopolized by one firm. What price will the monopolist charge if it must charge the same price to everyone? What quantity will the firm produce? Explain why. What will the firm’s profits be? How much economic surplus is lost as a consequence of the industry becoming monopolized? Find the change in both producer and consumer surplus. Suppose on the other hand, that the monopoly can practice perfect price discrimination. How much will it produce and why? What will its profits be? Why? What is the change in economic surplus compared to the competitive outcome. Why does your result differ from the case of the single-price monopolist?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
A monopolist faces a demand curve P= 11 – Q, where P is measured in dollars...
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A monopolist faces the demand curve P =11 Q, where P is measured in dollars per...
A monopolist faces the demand curve P =11 Q,
where P is measured in dollars per unit and Q in thousands of
units. The monopolist has a constant average cost of $6 per
unit.
Answer the following questions, showing all workings.
a) Calculate the monopolists profit-maximizing price and quantity.
Calculate the
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b) Draw the average and marginal revenue curves and the average
and
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water and both have zero costs. a. Operating independently, how
would each firm determine the quantity to be produced? Will this
quantity maximize the profits of both firms?
3. The inverse market demand for mineral water is P = 200-10Q, where Q is the...
3. The inverse market demand for mineral water is P = 200-10Q,
where Q is the total market output and P is the market price. Two
firms, A and B, have complete control over the supply of mineral
water and both have zero costs. a. Operating independently, how
would each firm determine the quantity to be produced? Will this
quantity maximize the profits of both firms?
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