a)
To describe: Profits are maximized are to be shown for a downward sloping linear demand curve
a)
Answer to Problem 11.6P
The level of output in market is 60.
Explanation of Solution
In market of
P is the price
Q is the output demand
MC is the marginal cost
So, equalization of the marginal cost in each market is,
So, the level of output in market 1 is 50.
In market-2, the quantity would be,
The level of output is 60
Introduction:
Monopoly competition occurs when many companies offer similar but not the same product in an industry.Companies in competition with monopolies usually try to differentiate their product to obtain market returns.
b)
To calcute: Total profit.
b)
Answer to Problem 11.6P
Total profit is equal to $825.
Explanation of Solution
In case of monopolist maintains separation in the market, then profit maximizing price would be set as corresponding following equality,
Here, MR = Marginal Revenue
MC= Marginal Cost
Now to find out the profit maximizing output and the price in market-1,
So, the profit maximizing quantity in market is 25
Now to calculate the price charged in market-1 as,
So, the maximizing price is $20 in market 1
Now to find out the profit maximizing output and the price market 2,
So, the profit maximizing quantity in market-2 is 30
Now to calculate the price charged in market-2 as,
So, the maximizing price is $20 in market 2
Now, total profit is calculated as,
Therefore total profit is equal to $825
Introduction:
Monopoly competition occurs when many companies offer similar but not the same product in an industry.Companiesin competition with monopolies usually try to differentiate their product to obtain market returns.
c)
To describe: The new profit level of the monopolist.
c)
Answer to Problem 11.6P
The total profit is
Explanation of Solution
As the monopolist maintains the separation in the market, the profit maximizing price would be, set as,
Here, MR = Marginal Revenue
MC= Marginal Cost
Now to find out the profit maximizing output and the price in market-2,
So, the profit maximizing quantity in market is 32
Now to calculate the price charged in market-2 as,
So, the maximizing price is $19 in market 2
Now, total profit is calculated as,
Therefore, the total profit is $812
Now to find out the profit maximizing output and the price market 2,
So, the profit maximizing quantity in market-1 is
Now to calculate the price charged in market-2 as,
So, the maximizing price is
Now to find out the profit maximizing output and the price in market-2,
So, the profit maximizing quantity in market is 35
Now to calculate the price charged in market-1 as,
So, the maximizing price is
Now, total profit is calculated as,
Therefore, the total profit is
Introduction:
Monopoly competition occurs when many companies offer similar but not the same product in an industry.Companies in competition with monopolies usually try to differentiate their product to obtain market returns.
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Chapter 11 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
- Assume a monopoly firm is able to engage in perfect (or first degree) price discrimination and the demand for the monopolist's product is given by the data in the chart. This firm will sell one unit of output if it charges a price of $ . The firm can lower the price to $ to sell a second unit, which would result in total revenue equal to $ lower the price to $ The firm can to sell a third unit, which would result in total revenue equal to $ to sell a fourth unit, which would The firm can lower the price to $ result in total revenue equal to $ Price per unit $20 16 12 8 4 0 Quantity Demanded 0 1 2345arrow_forwardGraphically show a monopoly firm that currently sells 250 units of output at a price of $60/unit, where the marginal revenue of the 250th unit is $40, the marginal cost of the 250th unit is $50, and the average total cost at 250 units is $60. [Hint: Based on the information given, is the quantity you’re asked to show the profit-maximizing quantity? Think about what has to be true for profit-maximization.] Based on the graph and assuming the firm attempts to profit maximize (and succeeds), what would happen to price, quantity, MR, MC, and ATC? (rise, fall, or stay the same?)arrow_forwardTo answer this question, you will want to work out the answer using a graph on a piece of scratch paper (not turned in). You are going to compare the outcomes in the case where there is perfect competition to the monopoly case. So, as an intermediate step, you will need to compute the equilibrium outcomes under competition and monopoly. Suppose that you have the following information about the demand for oil. Price ($/barrel) 80 70 60 50 40 30 20 10 Suppose that the marginal cost to produce a barrel of oil is $20. What is the deadweight loss if the oil market is a monopoly? Quantity demanded(# barrels) 5 6 7 8 9 10 11 12arrow_forward
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- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc