At an output level of 100, a monopolist faces MC = 15 and MR = 17. At output level q = 101, the monopolist faces MC = 16 and MR = 15. To maximize profits, the firm Group of answer choices reduce the production should produce 100 units. should produce 101 units. increase the production
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- How does one measure competition in an industry? Can concentration be used as a proxy? What does SCP say about high levels of concentration and low levels of concentration?You are the manager of a monopolist that produces women shoes and faces a random marginal cost. The demand for women shoes is O = 1000 - 0.1P Marginal cost can be constant at either $60 with a probability of 50% or $40 with a probability of probability of 50%. Draw a graph and plot the demand for shoes. Derive the marginal revenue curve and plot it on the graph. Find the price and output that maximize profits. Find the firm's profits.Question 4 OCP is the monopoly seller of Soma with a constant marginal cost of production of $1 a unit. There are 100 potential consumers of Soma who belong to one of two types, heavy and light. There are an equal number of each type. The inverse demand curve of heavy users is pH(q) = 9.4 – 2q while that of light users is pL(q) = 3– q. We also assume there is no trade between different types of buyers. 1. If OCP could perfectly discriminate between the two types of buyers what two-part tariff should they charge each type to maximize profit? 2. Suppose the Government were to ban such price discrimination and required OCP to set a single two-part tariff. What would the profit-maximizing two-part tariff be? OCP cannot forbid any buyer from purchasing at the announced tariff.
- An umbrella manufacturer sells its product in Nevada and Oregon. Due to different climates, each state has different demands for umbrellas. The marginal cost of production is the same in each state and is a constant $10. The demand curve for raincoats in each state is: QOregon = 120-2P (or P = 60 -0.5QOregon) QNevada = 60 - 4P (or P = 15 -0.25QNevada) The umbrella manufacturer wants to practice third-degree price discrimination. How much should it charge in each state? (Assume that resale between the states is not possible.) P = $10 (price = marginal cost) in both Oregon and Nevada. P = $35 in Oregon and P = $10 in Nevada. P = $35 in Oregon and P = $12.5 in Nevada. It should only sell in Oregon, and charge P = $35 there. None of the above choices are correct.Industrlal Economics A market is characterised by an inverse demand curve p 6- 20 where Qis total quantity. Two firms, A and 8, are competing à la Cournot and TCA(ga) = 2qaand TCe(ge) = q Firms profts are equal to: o a) A = and a = (b) = and ন = O (o T = and T- O () - 1 and i - 4 Successivo9. The kinked demand curve Wilke is a manufacturer in the oligopolistically competitive market for footballs. Two other manufacturers, Rawlding and Spaldon, compete with Wilke for football consumers. Wilke faces the kinked demand curve for footballs depicted on the graph. Initially, Wilke charges $30 per football, producing and selling 7 million footballs per year. PRICE (DOLLARS PER BALL) 36 35 34 33 32 31 30 29 28 27 28 5 в 7 8 FOOTBALLS (Millions of balls) 9 10 ? As an oligopolist, Wilke is a price maker. If Wilke raises the price of its football from $30 to $32 per ball, the quantity of Wilke footballs demanded million footballs per year. If Wilke reduces the price of its football from $30 to $28 per ball, the quantity of footballs demanded million footballs per year. (Hint: Mouse over the points on the graph to see their coordinates.) by by If Wilke lowers the price of its football below $30, the kinked demand curve model suggests that Rawlding and Spaldon will respond by
- Consider a monopolist that sells cable subscriptions. When the price is $10 a week, it can sell 175 subscriptions. When the price is $15 a week, it can sell 100 subscriptions. The monopolist has fixed costs of $200. The MC for the provision of the cable is $6 a week. If this monopolist must choose between selling 100 or 175 subscriptions, it will choose to sell units at a price of and earn economic profits equal to 175; $10; $700 100; $15; $700 175; $15; $900 100; $15; $900 none of the aboveA market has a total demand for 100 units of the product produced. Firms L and F operate in the market and compete in prices. Consumers buy from the cheapest firm and split equally between the firms if the firms’ prices are the same. The firms have the same marginal cost c. Firm L sets its price first and firm F sets its price only after that. Suppose that the smallest amount by which prices can be changed is ε. (a) Suppose that firm L sets the monopoly price pL = pM. What price does firm F set in response and what profits do the two firms earn? Comment on the outcome of this sequential price competition game as compared to the sequential quantity competition game in the slides. (b) Suppose instead that Firm L sets the price pL = c. What price does firm F set in equilibrium and what profits do the two firms earn?Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to clean the eyepiece. Jimmy believes he has the following demand for his service: Price of a Peep $1.20 Quantity of peeps demanded 1.00 90 100 150 200 250 300 70 60 50 350 40 30 400 450 20 10 500 550 a) For each price, calculate the total revenue from selling peeps and themarginal revenue per peep. Price Quantity TR MR $1.20 100 90 100 150 200 70 250 60 300 350 50 40 30 400 450 20 500 10 550 b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be? c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps. Jimmy discovers, though, if he…
- A downtown bar serves a drink that UCSB students love. The profit-maximizing owner knows that any given student has a demand for drink given by p= 14 -q and a non-student has demand p = 6 - q. Because the bar can't identify whether a customer is a student, she decides to sell drinks in packages. She offers a large package of 12 drinks and a small package of 4 drinks, and each student is only allowed to buy one package. Resales are strictly prohibited. The bar's marginal cost is 2. If both packages are offered and priced optimally, what is the minimum surplus students must get from the large package in order to not want to buy the small package? 64 32 OC. 26 O d. 80You run a donut shop. You have two types of customers – early morning, and late morning. Below are the maximum prices a 6 am customer and a 10 am customer are willing to pay for a cup of coffee, a donut, and a coffee/donut bundle. There are 100 customers in each group per day. 6 am customer 8 am customer Coffee 0.70 0.60 Donut 0.50 1.00 Bundle 1.20 1.60 Your marginal cost of coffee is $0.10. Your marginal cost of a donut is $0.40. Your marginal cost of a bundle is $0.50. Is pricing the products separately more profitable than bundling the two products? If so, how should you price your bundle? Show all your computations.Assume that there are two consumer of a good X. Mr. A has a utility function u (x)10xx2,whileMrs.Bhasautilityfunction u (x)10x2x2 . AB Farmer F, the monopoly producer of good X, cannot distinguish between Mr. A and Mrs. B. However, he can sell different sized bundles, and charge different prices for them. a. What are the utility-maximizing levels of good X consumption xA and xB for Mr. A and Mrs. B, respectively? b. Suppose that Farmer F offers the bundles of size xA and xB . What are the prices ( pA , pB ) that he should charge so that Mr. A consumes the xA -sized bundle at price pA and Mrs. B consumes the xB -sized bundle at price pB ?