Image uploaded answer is not allowed please dear expert 17. You are the manager of a firm that competes against four other firms by bidding forgovernment contracts. While you believe your product is better than the competition's,the government purchasing agent views the products as identical and purchases from thefirm offering the best price. Total government demand is Q = 1,500 - 5P, and all fivefirms produce at a constant marginal cost of $120. For security reasons, the governmenthas imposed restrictions that permit a maximum of five firms to compete in this market;thus, entry by new firms is prohibited. A member of Congress is concerned because norestrictions have been placed on the price that the government pays for this product.In response, she has proposed legislation that would award each existing firm 20 percentof a contract for 700 units at a contracted price of $160 per unit. Would you support oroppose this legislation? Explain. (LO2)

In the scenario described, you are managing a firm in a competitive environment where your firm and…

Answered: 17. You are the manager of a firm that…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.10P

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9. A state-owned power company monopolize electricity supply. Its daily variable cost of increasing electricity generation is $8 per unit. It has a constant return on output size over time and its daily marginal cost of electricity generation is $7 per unit. If the daily peak demand Q1 and off-peak demand Q2 in the market are: Q1 = 100 - 2P^(1/2), Q2 = 50 - 5P^(1/3) where P is the unit price. The peak time is 6 hours, and the off-peak time is 18 hours. What is the optimal generation capacity of the power company during peak time (Q1)? O a) 64.00 O b) 72.00 O c) 80.00 O d) 88.00 → The
12. Assume that a water distribution monopoly serves two consumer types, industrial and residential. The demands by two classes are as follows. Industrial: QI=30-PI and Residential: QR=24-PR. The company has no costs other than the fixed costs of the pipeline, which is $324. What are the Ramsey prices? a. PI= $10 and PR=$10 b. PI= $30 and PR=$24 c. PI= $18 and PR=$18 d. PI= $15 and PR=$12 e. None of the above please provide a detailed explanation!
24 $70 $60 i of $50 $40 $30 $20 -LRATC = LRMC $10 Demand = P MR $0 50 100 150 200 250 Output (Q) The diagram above shows the demand and cost curves for a market that could either be a monopoly or perfectly competitive in Long- Run Equilibrium. If the market above were a monopoly, the monopolist would earn in Total Profit (Producer Surplus) in the Long-Run. Select one: а. zero b. $2,500 c. $1,000 d. $2,000
The table below shows demand and cost information for a natural monopoly. Use the information in the table to answer the questions below: Price in $ Quantity Total Revenue in $ Marginal Revenue in $ Marginal Cost in $ Average Total Cost in $ -- 200 195 195 165 185 195 1 185 155 170 190 380 175 160 167 185 3 555 165 166 180 4 720 165 175 168 875 155 175 205 170 1020 145 170 245 184 1155 135 165 7 305 199 1280 125 160 8 Assuming no government intervention in this market; what would be the equilibrium price? 24 If the government decided to regulate and set the price equal to average cost; the new price would be: 24 In general, this type of regulation tends to cause the monopoly output to
As a result of globalization and new information and communications technology, would you expect that the definitions of markets that antitrust authorities use will become broader or narrower?
1. Recall the regulation model where legislators apply regulations to garner votes. Votes are a function of producer utility (UR ) and consumer utility (UC ). The legislator’s vote/utility function is V = V(UR , UC ). If U R = R, and U C = K – R – L, where K is a constant and R and L are the typical monopoly versus competitive market outcome below. Obviously, both U R and U C are affected by the eventual price (P) set by the legislator because both R and L are affected by that price. (a) Now suppose the demand equation is given by P = 100 - Q , and MC = $20. Write R as a function of the price and show that the price that maximizes producer utility is $60. (b) Given the MC and demand equation above, find the maximum possible consumer surplus (hint: this will be when the market is competitive). (c) Now suppose that (in addition to the information in parts d and e), the legislator gets votes according to V (U R, U C ) = 3U R + U C . Find the price that maximizes the legislator’s votes.
3. An incumbent firm, Firm 1, faces a potential entrant, Firm 2, that has a lower marginal cost. The market demand curve is p = 120 – 91 - 92. Firm 1 has a constant marginal cost of $20, while Firm 2's is $10. a) What are the NE quantities, price, and profits if there is no government intervention. b) To block entry, the incumbent appeals to the government to require that the entrant incur extra costs. What happens to the equilibrium if the legal requirement causes the marginal cost of the second firm to rise to that of the first firm, $20? c) Now suppose that the barrier leaves the marginal cost unchanged, but imposes a fixed cost. The incumbent keeps its strategy from a). What is the minimal fixed cost that 1 will prevent entry?
16-5. Your pharmaceutical firm is seeking to open up new international markets by partnering with various distributors. The different distribution within a country are stronger with different market segments (hospitals, retail pharmacies, etc.) but also have substantial overlap. A. In Egypt, you calculate that the annual value created by one distributor is $60 millions per year, but would be $80 millions if two distributors carried your product line. How much of the value can you expect to capture? B. Argentina also has two distributors with values similar to those in Egypt, but both are run by the government. How does this affect the amount you could capture? C. In Argentina a, if you do not reach an agreement with the government distributors, you can set up a less efficient Internet-based distribution system that would generate $20 million in value to you. How does tis affect the amount you could capture?
A monopoly is considering selling several units of a homogeneous product as a single package. Analysts at your firm have determined that a typical consumer’s demand for the product is Qd = 100 − 0.5P, and the marginal cost of production is $130. a. Determine the optimal number of units to put in a package._____ units b. How much should the firm charge for this package? $
General Motors, the automobile manufacturing company, recently ran an advertisement for its cars. It offered a 21% discount on its suggested retail price on all of its cars only to “current competitive owners” - anyone who is currently owning or leasing a NON-General Motors car. Customers must show proof of ownership (or lease) of a 2001 model year or newer non-GM vehicle dated at least 30 days prior to the sale of a new General Motors car. 1) How does General Motors benefit from selling cars at a 21% discount to non-GM owners? Explain why this pricing strategy increases General Motors’ revenues and profits versus selling all General Motors cars at one price. Be sure to use economic concepts used in the class for your answer. 2) Why does General Motors require proof of ownership (or lease) of a non-GM vehicle? Explains how this benefits General Motors.
3. As the new owner of Legend's Bar and Grill you must decide on a cover charge and drink prices. Suppose there are two types of drinkers. The partiers have demand: Q1 = 6 – P, where Q1 is drinks per night and P is price per drink. The social drinkers have demand: Q2 = 3 – 0.5P. You cannot distinguish between the two types so you charge the same price to everyone. Because the University is providing you unlimited alcohol at a fixed price, assume your marginal cost of a drink is zero, but you must pay the University a fixed cost (which is low enough that it can be ignored for this problem). What cover charge (rounded to the nearest dollar) and per drink cost would maximize nightly profits? (a) Cover $10; Per Drink Price = $1.50 (b) Cover = $5; Per Drink Price = $1.50 (c) Cover = $5; Per Drink Price = $3.00 (d) Cover $10; Per Drink Price = $3.00 %3D
A drug company produces a new drug to treat baldness. The inverse demand curve for the drug is P = 205 - 200, where Q measures the number of pills in millions. The various costs of production are given by TC = 100 +5Q, ATC = 5 + 100/Q, and MC = 5. If the government grants this firm a patent, it will earn profits of ___________. If the government revokes the patent, and the firm must sell its drug at marginal cost because of competition, it will earn profits or losses of $600 million; $500,000 $70 million; -$25 million $2 billion; $0 $400 million; -$100 million

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