Microsoft Word - Homework5.docx TEXAS A&M INTERNATIONAL UNIVERSITY A.R. SANCHEZ, Jr. SCHOOL OF BUSINESS Course: ECO XXXXXXXXXXManagerial Economics - SUMMER 2021 Instructor: Dr. CONSTANT YAYI...

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Hello, please be thorough with every question. Also, I will need the response to the last question, question 5 of Part B of problem 2 by tomorrow. please start with that question first.


Microsoft Word - Homework5.docx TEXAS A&M INTERNATIONAL UNIVERSITY A.R. SANCHEZ, Jr. SCHOOL OF BUSINESS Course: ECO 5310-680 Managerial Economics - SUMMER 2021 Instructor: Dr. CONSTANT YAYI. MDD: June 20 by 11:59 p.m. Homework 4/Problem Set 5 Recommended Due Date, RDD: June 18 by 11:59 p.m. Mandatory Due Date, MDD: June 20 by 11:59 p.m. Notes: Please type your answers and submit your work either in word format or pdf format. Problem #1 Part A (Price discrimination) A monopoly sells a certain product X in two markets A and B. The inverse demand function in market A is given by ?! = 100 −2?!, and the inverse demand function in market B is given by ?" = 60 − # $ ?", where both prices, ?! and ?", are measured in dollars. The monopolist’s total cost function is ?? = 250 + 20? where ? = ?! + ?" and its marginal cost of production is MC = 20 in both markets. If the monopolist can prevent resale, determine: 1. the quantity it will produce in both markets A and B; that is find ?! and ?". 2. the price it will charge in both markets A and B; that is find ?! and ?". 3. the monopolist’s total profit. Part B (Single-price monopoly) Now assume that the monopolist charges a single and uniform price in both markets. The inverse demand function is thus given by ? = 70 − % $ ?. The monopolist’s total cost function is still the same ?? = 250 + 20? and its marginal cost of production is MC = 20. 4. Determine the profit-maximizing price and quantity. 5. Determine the monopolist’s profit. 6. RECAP: Compare the two scenarios (price discrimination and single-price monopoly). Problem #2 Part A. The diagram below illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. 1. Calculate the consumer surplus (CS). 2. Calculate the profit made by the monopoly. Part B. Now, assume the monopoly is able to practice perfect price discrimination. 3. If the monopoly illustrated in the figure above could engage in perfect price discrimination, then how many units of output would be produced? Explain your answer. 4. If the monopoly illustrated in the figure above could engage in perfect price discrimination, then what would be the total revenue collected by the monopoly? Explain your answer. 5. Consumers are better off in a monopoly setting where a single and uniform price is charged for all customers than in a monopoly with perfect price discrimination where different prices are charged for the same good. Do you agree or disagree? Explain. Response should be at least 250 words.
Answered 4 days AfterJun 15, 2021

Answer To: Microsoft Word - Homework5.docx TEXAS A&M INTERNATIONAL UNIVERSITY A.R. SANCHEZ, Jr. SCHOOL OF...

Komalavalli answered on Jun 17 2021
130 Votes
Problem 1
Part A
PA = 100 – 2QA
PB = 60 -3/2 QB
MC A = MC B =20
In monopoly equilibrium for market A is MRA = MCA
TRA = P*QA
TRA = (100 – 2QA)*QA
TRA = 100
QA – 2QA2
MRA = 100 – 4 QA
100 – 4QA = 20
4QA = 80
QA = 20
In monopoly equilibrium for market B is MRB = MCB
TRB = P*QA
TRB = (60 -3/2)*QB
TRB = 60 QB – 3/2 QB2
MRB = 60 – 3QB
60 – 3QB = 20
3QB = 40
QB = 13.33
The equilibrium quantity of market A is 20 and market B is 13.33.
2)
PA = 100 – 2QA
QA = 20
PA = 100 – 2*20
PA = 100 – 40
PA = 60
QB = 13.33
PB = 60 -3/2 QB
PB = 60 -3/2*13.33
PB = 60 -19.95
PB = 40.05
Price for market A is $60 and market B is $40.05.
3.
Monopolist Total Profit:
Monopolist profit from market A
ᴨA = TRA – TCA
TRA = PA*QA
TRA = 60*20
TRA = 1200
TCA = 250 + 20*QA
TCA = 250 + 20*20
TCA = 250 + 400
TCA = 650
ᴨA = 1200-650
ᴨA = 550
Monopolist profit from market B
ᴨB = TRB – TCB
TRB = PB*QB
TRB = 13.33*40.05
TRB = 533.86
TCB = 250 + 20*QB
TCB = 250 + 20*13.33
TCB = 250 + 266.6
TCB = 516.6
ᴨB = 533.86-516.6
ᴨB = 17.26
Monopoly’s Total Profit = ᴨA+ ᴨB
Monopoly’s Total Profit = 550 + 17.26
Monopoly’s Total Profit = 567.26
Part B (Single Price monopoly)
P = 70 – 1/2Q
TC = 250 + 20 Q
MC = 20
4.
TR = P*Q
TR = 70Q – 1/2Q2
MR = 70 –Q
MR = MC
70 – Q = 20
Q = 50
Substitute Q = 50 in P = 70– 1/2Q
P = 70 – 1/2*(50)
P = 70 – 25
P = 45
Equilibrium quantity Q is 50 and price is $45.
5.
Monopolist’s profit
ᴨ = TR –TC
TR = P*Q
TR = 45*50
TR = 2250
TC = 250+20*50
TC = 250 + 1000
TC = 1250
ᴨ = 2250-1250
ᴨ = 1000    
6. In price discrimination market the total quantity supplied was...
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