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(Price Discrimination of Second Degree) A monopolist has 2 sets of customers distinguished by their demand functions p1=15-p1 and p2=25-2(q2)respectively. The total cost function of the firm is of the form C(Q)=5+3Q , where Q=q1+q2 (a) Derive the aggregate demand function of the monopolist and draw it in a clearly labeled diagram. (b) Derive the aggregate marginal revenue function and graph it in the same diagram. (c) Derive the optimal uniform price and the equilibrium level of profit. Illustrate the equilibrium in the figure you drew for parts (a) and (b). (d) Obtain the consumer surplus in each market under uniform pricing and the total producer surplus in the two markets combined. (e) Now assume that the monopolist can practice group pricing. What are the profit maximizing prices and levels of consumer surplus in the 2 markets? (f) Defining total surplus as the sum of consumer and producer surplus in the 2 markets, does price discrimination increase or reduce total surplus?
At what value of p would you be indifferent between these two alternatives? Given your response to part a, would you be classified as risk averse, risk neutral, or risk seeking? Suppose that alternative 2 changed so that you would receive $1,000 with..
An investor has an opportunity to buy a parcel of land for $100,000. He plans to sell it in two years. What will the sale price have to be for the investor to get a 25% constant dollar before-tax ROR with inflation averaging 10% annually? What escala..
Assume a monopolist faces a market demand curve P ?= 100 -? 2Q and has the short-run total cost function C= 640+ 20Q. What is the profit-maximizing level of output? What are profits?
Consider Karl, an individual investor. Karl is 30 years old, earns after-tax income of $50,000 per year, expects to retire at age 65, and receive after-tax Social Security payments in retirement of $20,000/year. Karl has a current net worth of $50,00..
Many rich developed countries (like countries of the EU or the US have suffered from inexpensive imports coming from Asia and other emerging countries. As a result, many industries and parts of sectors of our economies have disappeard since the onset..
Under which of the following circumstances will the seller pay the whole of a per-unit tax? When a simple monopolist – no price discrimination – chooses to sell an additional unit of a good or service. Suppose we observe that the price of gasoline ha..
Prior to opening of trade shoes cost $50 per pair in U.S. and $10 per pair in China. If the price of shoes in U.S. were to fall to $20, U.S. demand of shoes would increase to 60 million pairs and supply would fall to 54 million pairs. What is the int..
Discuss JIT-Just-in-Time and Lean Production - Discuss Collaborative Commerce and its benefits.
GM entered the Chinese market at a time when demand was very limited. Why? What was the strategic rational? Why did GM enter through a joint venture with SAIC? What are the benefits of this approach? What are the potential risks here? Why did GM not ..
The government wants to eliminate the inflationary gap by changing expenditures. What policy do you suggest? By how much will unemployment change after you policy has taken effect?
Electricity is often generated using coal fired plants. Unfortunately, coal burning produces SO2, which causes acid rain. Consider two countries that border each other to answer the following question. Country A’s SO2 emissions are known to negativel..
Suppose there are two industries, airlines (A) and breweries (B), and that the demand for secretatrial labor, E, in each industry is EA = 25 – wA and EB = 20 – 2 wB. If the supply of secretarial labor is E = 2 w, then what are the equilibrium wage an..
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