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Microeconomics
How can a monopolist become more profitable by means of price discrimination?
Microeconomics
If there is an increase in the price of red meat, a substitute in production for milk, then
Microeconomics
Given the utility function: U=(X1^1/2 X2^1/2)
a) calculate marginal rate of substitution for X1 and X2
b) calcualte the MRS for the indifference curve that passes through (800, 1200)
c) estimate the increase in X2 required to maintain current utility when X1 falls by 14 units. Evaluate the condition to show that the points lie on the same indifference curve.
a) calculate marginal rate of substitution for X1 and X2
b) calcualte the MRS for the indifference curve that passes through (800, 1200)
c) estimate the increase in X2 required to maintain current utility when X1 falls by 14 units. Evaluate the condition to show that the points lie on the same indifference curve.
Microeconomics
consumer surplus indicates that
Microeconomics
a) You are examining and reporting on the market performance of a very small number of firms that are known to often collude in setting output prices and quantities. Illustrate and explain using a diagram what effect this behaviour is most likely to have on the allocation of factors of production.
b) What will happen if one of these firms’ cheats on the others in some way? Illustrate and explain using a diagram.
b) What will happen if one of these firms’ cheats on the others in some way? Illustrate and explain using a diagram.
Microeconomics
A small town is served by many competing supermarkets, which have constant marginal
cost.
a. Using a diagram of the market for groceries, show the consumer surplus, producer
surplus, and total surplus.
b. Now suppose that the independent supermarkets combine into one chain. Using a
new diagram, show the new consumer surplus, producer surplus, and total surplus.
Relative to the competitive market, what is the transfer from consumers to
producers? What is the dead-weight loss?
cost.
a. Using a diagram of the market for groceries, show the consumer surplus, producer
surplus, and total surplus.
b. Now suppose that the independent supermarkets combine into one chain. Using a
new diagram, show the new consumer surplus, producer surplus, and total surplus.
Relative to the competitive market, what is the transfer from consumers to
producers? What is the dead-weight loss?
Microeconomics
The following graph shows a firm in a monopolistically competitive industry.
a. Show the firm’s short-run profit-maximizing quantity and price. Is the firm making a
profit?
b. Carefully explain what will happen in the industry over time, and draw a graph of a
monopolistic-ally competitive firm in long-run equilibrium.
a. Show the firm’s short-run profit-maximizing quantity and price. Is the firm making a
profit?
b. Carefully explain what will happen in the industry over time, and draw a graph of a
monopolistic-ally competitive firm in long-run equilibrium.
Microeconomics
The following table shows the demand for a product produced by a monopolist, who has
a constant marginal cost and an average total cost of $45 per unit.
Quantity (thousands of units) Price (dollars per unit)
0 120
1 105
2 90
3 75
4 60
5 45
6 30
a. Calculate the total revenue and marginal revenue for each level of quantity.
b. What are the profit-maximizing level of output and the price of the product?
c. Calculate the monopolist’s profit.
d. Calculate the Lerner Index for this industry.
a constant marginal cost and an average total cost of $45 per unit.
Quantity (thousands of units) Price (dollars per unit)
0 120
1 105
2 90
3 75
4 60
5 45
6 30
a. Calculate the total revenue and marginal revenue for each level of quantity.
b. What are the profit-maximizing level of output and the price of the product?
c. Calculate the monopolist’s profit.
d. Calculate the Lerner Index for this industry.
Microeconomics
Analyze the two following situations for firms in competitive markets:
a. Suppose that TC = 100 + 15q, where TC is total cost and q is the quantity produced.
What is the minimum price necessary for this firm to produce any output in the short
run?
b. Suppose that MC = 4q, where MC is marginal cost. The perfectly competitive firm
maximizes profits by producing 10 units of output. At what price does it sell these
units?
a. Suppose that TC = 100 + 15q, where TC is total cost and q is the quantity produced.
What is the minimum price necessary for this firm to produce any output in the short
run?
b. Suppose that MC = 4q, where MC is marginal cost. The perfectly competitive firm
maximizes profits by producing 10 units of output. At what price does it sell these
units?
Microeconomics
what is a demand curve
