Consider two goods “Good 1” and “Good 2”. Assume the marginal cost of producing the goods...
Consider two goods “Good 1” and “Good 2”. Assume the marginal cost of producing the goods is zero and that each customer will purchase each good as long as the price is less than or equal to value. Customer values are: Customer A Customer B Good 1 $2,300 $2,800 Good 2 $1,700 $1,200 Suppose a monopolist only sold the goods separately. What price will the monopolist charge for good 1 to maximize revenues for good 1? What is the total profit to the profit-maximizing monopolist from selling the goods separately? What is a better pricing strategy for the monopolist? (mainly interested in this last question) What is the resulting profit?
Homework Answers
Ans. 1. A. $2300 - The is the price the monopolist would charge for good 1 to maximize Revenues for Good 1.
2. $7000 - This is the total profit to the maximising monopolist from selling the goods separately.
3. B. Bundle the good at $4000 ; Profits = $8000 - This is the better pricing strategy for the monopolist.
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Consider two goods “Good 1” and “Good 2”. Assume the marginal
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QUESTION 1 Please refer to the buyer willingness to pay values provided in the table on...
QUESTION 1
Please refer to the buyer willingness to pay values provided in
the table on page 178 in the book (i.e., Customers A and B with
Goods 1 and 2). If the monopolist only sold Good 1 by itself, what
is the profit maximizing outcome for the monopolist?
A.
Sell zero units at a price of $3000
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Sell one unit at a price of $2800
C.
Sell two units at a price of $2300
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QUESTION 1
Please refer to the buyer willingness to pay values provided in
the table on page 178 in the book (i.e., Customers A and B with
Goods 1 and 2). If the monopolist only sold Good 1 by itself, what
is the profit maximizing outcome for the monopolist?
A.
Sell zero units at a price of $3000
B.
Sell one unit at a price of $2800
C.
Sell two units at a price of $2300
D.
Sell two units...
1. (25 points) Suppose that a monopolist faces the inverse demand curve: P 100-Q and produces goods at a marginal cost of $5. Finally assume that the firm incurs no fixed costs A. Suppose the monopolist lowers the price from $90 to $89. Explain why the firm's marginal revenue is less than the price of the 11th unit sold, $89 (do not answer this question by providing a mathematical equation). B. At what price will the monopolist maximize its profit?...
1.If a cartel firm is producing a quantity at which the marginal revenue is $2 and the marginal cost is $2, the firm a. is producing the agreed upon quantity b. has erected a barrier to entry c. is producing less than the agreed upon quantity d. has acted in self-interest 2.If a monopolist is producing the profit-maximizing output level and at this output level, the marginal cost is 4 and the profit-maximizing price is $9, what is the make...
Q1.1-1.3
1 Bundling Suppose that a firm sells two different goods, A and B to two different potential customers (ie, consumer 1 and consumer 2). The firm has a marginal cost of zero dollars per unit of each good. Each customer buys at most one unit of either good. depending on whether the price exceeds or is less than the consumer's valuation. The table below show the maximum willingness to pay for each consumer and good Maximum Willingness to Pay...
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please answer all questions!
Figure 15-6 Price $20+ Marginal Cost 100 150 200 Quantity Marginal Revenue Refer to Figure 15-6. What is the deadweight loss caused by a profit-maximizing monopoly? O O $150 $200 $250 Os300 A monopolist faces market demand given by P - 60 - Q. For this market, MR = 90 - 2Q and MC - Q. What price will the monopolist charge in order to maximize profits? O $20 O $30 O so Osso In Canada,...
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