Economics Answers

A profit-maximizing monopoly produces a good with constant marginal cost, MC = 20, that it sells in two countries. The inverse linear demand curve is P₁ = 60 Q₁ in Country 1 and P2 60 - 20₂ in = Country 2. What is the equilibrium price and quantity in each country if resale between the countries is not possible? Does the monopoly price discriminate?

Hershey Park sells tickets at the gate and at local municipal offices to two groups of people. Suppose that the demand function for people who purchase tickets at the gate is QG = 10,000 - 100pc and that the demand function for people who purchase tickets at municipal offices is QG 9,000 - 100PG = The marginal cost of each patron is 5. a. If Hershey Park cannot successfully segment the two markets, what are the profit-maximizing price and quantity? What is its maximum pos sible profit? b. If the people who purchase tickets at one location would never consider purchasing them at the other and Hershey Park can successfully price dis criminate, what are the profit maximizing price and quantity? What is its maximum possible profit?

A profit-maximizing monopoly produces a good with constant marginal cost, MC = 20, that it sells in two countries. The inverse linear demand curve is Pi = 60 - 20, in Country 1 and P2 = 40 - ₂ in Country 2. What is the equilibrium price and quantity in each country if resale between the countries is not possible? What is the equilibrium price and quantity in each country if resale between the countries is possible? Compare the two equilibria.

A firm charges different prices to two groups. Would the firm ever operate where it was suffering a loss from its sales to the low-price group? Explain.

A firm is a natural monopoly. Its marginal cost curve is flat, and its average cost curve is downward sloping (because it has a fixed cost). The firm can perfectly price discriminate. Use a graph to show how much the monopoly pro duces, Q*. Show graphically and mathematically that a monopoly might shut down if it can only set a single price but operate if it can perfectly price discriminate.

A monopoly that sells internationally will often try to sell its product at different prices in different countries. Consider distributors for a monopoly that are located in two countries that are adjacent to each other. The inverse demand curves in the two coun tries are P₁ = 40 - 20₁ and P₂ = 1,000 - Q₂. For simplicity, the monopoly's marginal cost is constant at MC = 20. What is the profit-maximizing price and quantity in each country? Will the monopolist necessarily be able to sell its output at those prices if shipping costs between the two countries are low? Explain.

Explain the characteristics of perfect competitive market.

a) HairNice Production Sdn Bhd is considering the production of a new conditioning shampoo which will require the purchase of new mixing machinery. 

The machinery will cost RM375,000, is expected to have a useful life of 10 years and is expected to have a salvage value of RM50,000 at the end of 10 years. 

The machinery will also need a RM35,000 overhaul at the end of year six. 

A RM40,000 increase in working capital will be needed for this investment project. 

The working capital will be released at the end of the 10 years. 

The new shampoo is expected to generate net cash inflows of RM85,000 per year for each of the 10 years. 

HairNice Production's discount rate is 16%.

i）Compute the net present value (NPV) of the investment opportunity? 

ii) Based on your answer to (a) above, should Anita go ahead with the new conditioning shampoo?      

explain the meaning of cost of capital and its relevance in a net present value (NPV) analysis.

Now suppose that banking services in year 2 are not the same as banking services in year 1 because

they include internet banking, which year 1 banking services didn’t include. The technology for

internet banking was available in year 1 but the price of banking services with internet banking in

year 1 was $13 and no one chose that package. However, in year 2 the price of banking services

with internet banking was $12 and everyone chose to have that package in year 2 (that is, in year 2

no one chose to have the year 1 banking services package without internet banking).

e. Using year 1 prices, what is real GDP for year 2? What is the growth rate of real GDP?

f. What is the rate of inflation using the GDP deflator?

g. What is the labour productivity growth between year 1 and year 2 for the whole economy?