2. A single firm monopolizes the entire market for Batman masks and can produce atconstant average and marginal costs of 10. Originally, the firm faces a marketdemand curve given by Q = 60-P.a) Calculate the profit-maximizing price-quantity combination for the firm. Whatare the firm's profits? (Answer. Q = 25 units; π = $625)b) Now assume that the market demand curve becomes steeper and is given by:Q = 45-0.5P. What is the firm's profit-maximizing price-quantity combinationnow? What are the firm's profits?c) Instead of the assumptions in part b, assume that the market demand curvebecomes flatter and is given by: Q = 100-2P. What is the firm's profit-maximizing price-quantity combination now? What are the firm's profits?d) In each case, compute the demand elasticity for the profit-maximizing price-quantity combination and the markup. Can you find any relationship betweenthe markup and the elasticity? (Answer. & = -1,4;P₁ - MC = 25)e) Graph the three different situations of part a, part b, and part c using just onegraph.

A monopoly firm produces at MR = MC to maximize profit. Hence, profit-maximizing output occurs at…

Answered: A single firm monopolizes the entire…

A single firm monopolizes the entire market for Batman masks and can produce at constant average and marginal costs of 10. Originally, the firm faces a market demand curve given by Q = 60-P.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.3P

See similar textbooks

Related questions

Q: An injection-molding machine has a first cost of $1,050,000 and a salvage value of $225,000 in any…

A: Initial cost=105000 Annual cost=235000 per year Annual increase in cost=75000 Salvage value in any…

Q: arket structure of Zimbabwe

A: Market structure: refers to the characteristics of a market that determine the behaviour of buyers…

Q: The maximum total short-run economic profit of the firm with the cost and revenue curves that is…

A: The profit maximization level of output is the level of output at which the Marginal Revenue is…

Q: Suppose that every driver faces a 5% probability of an automobile accident every year. An accident…

A: Actuarially fair premium is a premium or price that is calculated based on the expected value of the…

Q: Consider two possible public works projects: Project A and Project B. The costs and benefits of each…

A: Project A Project B Benefits Tall Citizens $170 $130 Short Citizens $150 $100 Costs…

Q: Describe what it means for the distribution of earnings to have a "long right tail". Then, list…

A: When the earnings distribution has a "long right tail," a relatively small number of people or…

Q: Refer to the graph shown. The market represented here is in equilibrium when the price is: Price $12…

A: Demand curve is the downward sloping curve. Supply curve is the upward sloping curve. Equilibrium…

Q: What is the rationale for international trade? Provide a critical assessment of traditional and…

A: Trade is the exchange of goods, services, or capital between two or more countries or parties. It…

Q: If inflation has been running at 4.83% per year and a new car costs $10,400 today, what would it…

A: Inflation occurs when the price rises. Price increases as number of years increase, this is known as…

Q: Price (per unit) P₁ K O J NA Social Social Private Pri MC ATC MC G Q₁ Q₂ Q3 Q4 Quantity of…

A: Externalities are an important topic in economics because they represent the unexpected…

Q: MR PD Smith has heard that the government has proposed the imposition of a maximum price or price…

A: A price ceiling is a government-imposed price limit of how high a price can be charged by the…

Q: 3. Consider a firm operating in a perfectly competitive market. Answer the following questions as…

A: Perfect competition is a market structure characterized by a large number of small firms producing…

Q: a. Suppose that the carbon sequestration that results from planting a tree is worth $4. Graph the…

A: Externalities are the harmful or beneficial side effects arise out of production or consumption of…

Q: 9. William and Rachel are the only two bidders in an auction. They have private valuations drawn…

A: In a second -price auction , the highest bidder wins but pays the price of the second-highest…

Q: Understanding ________ allows economists to determine what people are likely to purchase and model…

A: Consumer satisfaction refers to the level of happiness or contentment that a consumer experiences as…

Q: A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it…

A: To find the profit-maximizing price, we need to determine the demand function, revenue function, and…

Q: A19 Subject - economics Consider a constant returns-to-scale production function f(k, l). Show…

A: A return-to-scale production function is a mathematical representation of how the output of a…

Q: Suppose that the equilibrium real federal funds rate is 6 percent and the target rate of inflation…

A: Equilibrium real federal funds rate = 6% Target inflation rate = 3% Current inflation rate = 3%…

Q: Homework 1 1. Suppose there are 100 identical firms in the perfectly competitive notecard industry.…

A: DISCLAIMER “Since you have posted a question with multiple sub-parts, we will solve first three…

Q: Economics Which of the following will reduce the price level and real output in the short run?…

A: In economics, the short run refers to a period of time during which some factors of production are…

Q: Suppose that Ciana is deciding whether or not to buy a pair of sneakers that she has been…

A: For Total Cost of Clana, we have to add opportunity cost to the price

Q: Exercise 2 Market value of equity Corporation QuantEcon has 1,000 outstanding shares. The price of…

A: Market value of QuantEcon = Total outstanding shares * Price per share

Q: Phillips Industries manufactures a certain product that can be sold directly to retail outlets or to…

A: Optimal price / quantity and profit for a firm: A firm always try to maximize its profits given the…

Q: According to the first paragraph of the statement, what factors did the committee consider in making…

A: The Federal Reserve serves as Country U's central bank. The Fed is a key player in the economy of…

Q: Suppose seafood price and quantity data for the years 2000 and 2009 follow. Use 2000 as the base…

A: Price relativity describes the relationship between a good or service's price in one era and that…

Q: 1 Payoffs matrix (Payoff 1, Payoff 2) Cournot Cartel Cournot 2 Cartel

A: Cheating in the Cartel increases any firm payoff, but decreases both payoff when both cheats

Q: Explain and graphically illustrate what happens to the equilibrium wage (of nurses) and equilibrium…

A: Labour market: labour market is a market where the firms and households interact. The firms demand…

Q: Labor (Number of workers) (Units) (Dollars) Output Fixed Cost Variable Cost Total Cost 0 1 2 3 4 0…

A: Diminishing marginal product refers to a concept in economics that describes the pattern in which…

Q: A simple closed economy with government sector is given by the following equations: C = 10 + 0.75 Y…

A: Given information: C = 10 + 0.75Y ------------> Consumption function I = 20…

Q: King Hardware sold 7 pounds of bolts yesterday at a price of $5.00 per pound. This point is…

A: Total revenue is the receipt from selling the product. It is calculated by multiplying the price by…

Q: Quantity O c. Firm 2 O d. Firm 3 FIN 1 2 3 4 5 6 7 Table 13-12 Long-Run Total Cost (Dollars) Firm 1…

A: In economics, returns to scale explains what happens to long-term returns as the scale of production…

Q: 4(a) Demetra is an agncultural consultant and can choose how many hours to work. Last year she…

A: Minimum wages implies the lowest amount that an employer is legally allowed to pay an employee for…

Q: 2. Consider a local utility company (Xcel Energy). a. In what ways is this company a natural…

A: A monopoly is a market structure in which a single firm is the sole seller of a product or service…

Q: Does Ireland's government have regulations to hire a certain percentage of local staff to support…

A: As of my view point cutoff date in September 2021, Ireland does not have specific regulations that…

Q: MR PD Smith has heard that the government has proposed the imposition of a maximum price or price…

A: Price control is a government policy or regulation that sets a legal limit on the price at which a…

Q: The estimated monthly U.S. demand function for avocados is where p is the price of avocados and p,…

A: Equilibrium is where the demand curve intersects the supply curve. Demand curve is the downward…

Q: As people in the economy build this now-lower inflation into their expectations, the economy will…

A: A general rise in the cost of products and services over time is referred to as inflation. It…

Q: Consider the following production function: Q = AL° Kb. Assume A > 0. Further assume 0 < a < 1, and…

A: Given Production function: Q=ALaKbHere A>0 and 0<a<1 ; 0<b<1 The marginal product of…

Q: Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: a. $18…

A: A competitive firm is one of many firms that produce identical goods.

Q: Refer to the graph shown. Assume the market is initially in equilibrium at point j in the graph but…

A: Consumer surplus is the ratio below the demand curve and above the market price. It arises when…

Q: 9. A monopolist produces a good at a constant marginal cost of 4. Suppose the monopolist is able to…

A: The market situation where a single seller faces the entire market demand all by himself is known as…

Q: What is the most salient feature of Canada's employment insurance system that sets it apart from its…

A: Employment insurance (EI) refers to a social insurance program in Canada that gives temporary…

Q: What is the most salient feature of Canada's employment insurance system that sets it's apart from…

A: Employment insurance (EI) refers to a social insurance program in Canada that gives temporary…

Q: pheep and the quantity x sold of a certain product obey the demand equation below. x= -8p+176,…

A: Since you have posted a question with multiple sub parts, we will provide the solution only to the…

Q: are tal (C) factors of production for supply of land, the Marginal Productivity of labour is the…

A: The ability to produce a certain commodity or service at less of an opportunity cost than its…

Q: (Figure: Price Discrimination 2) The following figure shows a business that price discriminates. The…

A: Price discrimination is the defined in Economics as a practice of charging different prices from…

Q: 8. Short-run and long-run effects of a shift in demand Suppose that the tofu industry is initially…

A: Suppose that the tofu industry is initially operating in long-run equilibrium at a price level of $5…

Q: 17. Opportunity cost and production possibilities Van is a talented artist who sells hand-crafted…

A: Production possibilities frontier shows maximum combinations of two produced with the given…

Q: What is fiscal policy and what government entities make it?

A: Governments are political organizations that have the authority and power to make decisions and…

Q: (a) For the following extensive-form game: 1. Identify the pure and mixed strategy Nash Equilibria…

A: An extensive form game given above has same subgame pure and mixed strategy Nash equilibrium as…

Question

2. A single firm monopolizes the entire market for Batman masks and can produce at
constant average and marginal costs of 10. Originally, the firm faces a market
demand curve given by Q = 60-P.
a) Calculate the profit-maximizing price-quantity combination for the firm. What
are the firm's profits? (Answer. Q = 25 units; π = $625)
b) Now assume that the market demand curve becomes steeper and is given by:
Q = 45-0.5P. What is the firm's profit-maximizing price-quantity combination
now? What are the firm's profits?
c) Instead of the assumptions in part b, assume that the market demand curve
becomes flatter and is given by: Q = 100-2P. What is the firm's profit-
maximizing price-quantity combination now? What are the firm's profits?
d) In each case, compute the demand elasticity for the profit-maximizing price-
quantity combination and the markup. Can you find any relationship between
the markup and the elasticity? (Answer. & = -1,4;P₁ - MC = 25)
e) Graph the three different situations of part a, part b, and part c using just one
graph.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Calculation of optimal output and profit.

VIEW

Step 3: Calculation of optimal output and profit when demand becomes stepper.

VIEW

Step 4: Calculation of optimal output and profit when demand becomes flatter.

VIEW

Solution

VIEW

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Follow-up Questions

Read through expert solutions to related follow-up questions below.

Follow-up Question

Please solve the last two parts which is D and E, the first three sub parts has already been solved

Solution

by Bartleby Expert

SEE SOLUTION

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

WEBCAM RECORDING Industrial Economics da 6 A market is characterised by an inverse demand curve p =8 – 2Q where Q is total quantity. Two firms, A and B, are competing à la Cournot and TCA(qA) = 29A and TCB(qB) = q ta non %3D data Total profits n (1.e. the sum of profit for the two firms) are equal to: ggio max. ontrassegna O (a)n = nda %3D O (b) = 16 O (c)N = 4 O (d) = 9 Precedente Successivo
3. A firm is considering bidding for the franchise to sell cola and hot dogs at a baseball stadium. It estimates the demand functions for cola and hot dogs respectively as De=20-4pc-PH DH = 15-Pc-5PH where De is demand for cola in thousands (of cans), DH is demand for hot dogs in thousands, pc is the price of a can of cola in dollars, and PH is the price of a hot dog. The unit cost of supplying a hot dog is constant at $0.1, and the unit cost of a can of cola is likewise constant at $0.5. (a) Find the upper limit to the amount the firm would bid for the franchise.
The soluation avilible I believe it is wrong so please solve it carefully Carl and Simon are the only sellers of pumpkins at the market, where the total demand function for pumpkins is q =3 ,200−1,600p. The total number of pumpkins sold at the market is q = qC + qS, where qC is the number that Carl sells, qS is the number that Simon sells. The cost of producing pumpkins for each farmer is $.50 per pumpkin; the fixed costs are zero. .a. Find the Cournot equilibrium price and quantities. .b. Find the Bertrand equilibrium price and quantities. . .c. Suppose now that every spring the snow thaws off of Carl’s pumpkin field a week before it thaws off of Simon’s. Therefore, Carl can plant his pumpkins one week earlier than Simon while predicting Simon’s choice based on the previous year information. Simon observes Carl’s choice and chooses how much pumpkin to plant. Find the new equilibrium price and quantities. .d. Compare the quantities and prices in parts a, b, and c. Rank these outcomes…
a. Given the following demand functions for two market segments (in millions) P1 = 440 – 8Q1 P2 = 160 – 5Q2 TC = 500 +40Q Calculate the profit maximizing Quantities & corresponding Prices and profit level. Based on demand elasticities demonstrated that this monopolist is making use of the concept in its pricing strategy. b. Explain the reasoning behind the fact that a firm in a perfectly competitive market may continue to produce and sell its products at a loss within the short run but might not opt to do so in the long run. c. What factors in your view are behind monopoly power within markets and what in your view limits monopoly power within markets?
What’s the total profit in the market when the firm price discriminates between the two groups? How does this compare to when they just charge one price?
4. The market demand function for birthday cards in Greenwich Village is: P= 100 - 100. The total cost function for producing birthday cards is: C = 60 + 20q. Suppose that a firm can perfectly price discriminate (i.e. conduct first- degree price discrimination). How much will its profits be? F2 # 20 F3 $ IS DOD 000 F4 LRING % F5 E MacBook Air F6 & F7 L *
10. The platypus is a shy and secretive animal that does not breed well in captivity. But two breeders, Sydney and Adelaide, have discovered the secret to platypus fer- tility and have effectively cornered the market. Zoos across the globe come to them to purchase their output; the world inverse demand for baby platypuses is given avby P=1,000-20, where Q is the combined output of blu Sydney (qs) and Adelaide (qA). vide a. Sydney wishes to produce the profit-maximizing quantity of baby platypus. Given Adelaide's choice of output, 9A, write an equation for the residual demand faced by Sydney. 19125 non c. ab. Derive Sydney's residual marginal revenue curve. Assume that the marginal and average total cost of raising a baby platypus to an age at which it can be sold is $200. Derive Sydney's reaction function. d. Repeat steps (a), (b), and (c) to find Adelaide's reac- tion function to Sydney's output choice. 18 e. Substitute Sydney's reaction function into Adelaide's to solve for…
Firm P has a monopoly on producing printers, and Firm C has a monopoly on producing computers. Printers and computers are complements, and Q is the number of bundles, with one printer and one computer in each bundle. Pp is the price of a printer, and Pc is the price of a computer. The demand function is Q = 10 – Pp – Pc, and marginal cost is zero. he two firms will choose prices to maximize profits, but neither firm knows the price charged by the other firm. Calculate Q, Pp, Pc, and profits for each firm.
40 Output Total Total (Q) Price Revenue Cost 1 $20.00 $2.50 i of 2 $15.00 $5.00 $10.00 $7.50 $5.00 $10.00 The table above shows demand and cost information for a firm that has market power and can set its price. If the firm is able to Perfectly Price Discriminate, it's profit maximizing Output (Q) is: Select one: а. 3 b. 4 C. d. 1
The graph below shows the demands and marginal revenue in two markets, 1 and 2, for a price discriminating firm along with total marginal revenue, MRT, and marginal cost: Price and cost (dollars) 100 80 60 AS 40 20 0 200 100 300 MR1 400 MR2 MC 500 Quantity How should the firm allocate sales between the two markets? 600 D₁ 700 MRT 800 900 D₂ 1000 Q
1.-Dayna’s Doorstops, INC. (DD) is a monopolist in the doorstop industry. Its total cost function C(⋅) is given by the quadratic function of output C(Q) =100 – 5Q + Q2 . The inverse demand function for doorstops P(⋅) is given by the linear function P(Q) = 55 – 2Q . Note that the marginal cost C′(Q) is not constant. (Also, it happens to be negative for 0 ≤ Q < 2.5.) (a) Write down the profit-maximizing problem for DD, and determine its optimal output, QM. (b) Find the profit-maximizing price set by DD, PM and its marginal cost at the output level QM. From these two pieces of information, can you compute the elasticity of demand at that same level of output without taking any derivative? (c) How much consumer surplus CSM and producer surplus PSM and total surplus does DD generate by its profit-maximizing plan? (d) Find the profit-maximizing output, Qc, if DD acted like a price-taker (i.e., a perfect competitor). (e) Find the profit-maximizing price set by DD, Pc, as well as its…
Consider any market that has a demand curve given by: Qd = 240 - 2P. Where Qd is the total quantity demanded in the market, given in millions of units and P is the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market with Cmg = CVme = 15 and fixed monthly costs equal to 1,400. About this market, ask yourself: a) What is the profit of each of the oligopolists? b) Imagine that one of the companies managed to implement a process innovation capable of halving its Cmg and CVme, so that they would go from 15 to 7.5. This investment implies an additional monthly expense of $1,800. Discuss the statement: "If this situation occurs, the innovative company will not implement variable cost reduction, as the quantity supplied in the market will increase very little; prices will remain very close to what they are today and its profits will not increase"