## Microeconomics Theory with Applications

Business

## Quiz 10 :

Monopoly

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Q14 Q14 Q14

A book vendor can produce a book at a constant MC equal to zero, and its potential buyers have the following reservation prices: $55, $50, $45, $40, $35, $30, $25, $20, $15, $10, $5. Suppose the book vendor can identify each buyer's reservation price and is able to set an individual price for each buyer. In order to maximize profits, the monopolist will sell:

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Multiple Choice

Q31 Q31 Q31

A book vendor can produce a book at a constant MC equal to zero, and its potential buyers have the following reservation prices: $55, $50, $45, $40, $35, $30, $25, $20, $15, $10, $5. If the book vendor must announce a take it or leave it price (i.e., he cannot price discriminate), what price maximizes profits?

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Multiple Choice

Q76 Q76 Q76

A book vendor can produce a book at a constant MC equal to zero, and its potential buyers have the following reservation prices: $55, $50, $45, $40, $35, $30, $25, $20, $15, $10, $5. What are the unrealized gains from trade if the monopolistic vendor chooses p = $25?

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Multiple Choice

Q89 Q89 Q89

As the result of a patent, only one company produces the drug Zoloft. This company was accused of abusing its market power: using its position as the sole producer of the drug to act as a monopolist and charge very high prices. A Competition Bureau economist estimates that the price elasticity of demand for Zoloft at its current price is - 0.5. Does this evidence support or contradict the contention that the firm is a profit- maximizing monopoly? Why or why not?

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Q94 Q94 Q94

A monopolist firm faces the following cost curve: C(Q)= Q2 + 12, where Q is the output produced. The demand for its product is given by P = 24 - Q.
i)Find the equilibrium price and quantity.
ii)Find the profit level.
iii)Calculate the Consumer Surplus, the Producer Surplus and the Deadweight Loss associated to the monopoly.

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Q95 Q95 Q95

The market demand for peanuts is given by p = 50 - 0.5y. Squirell Inc. is the only supplier of peanuts. Its total cost function is given by TC(y)= 10y. Calculate:
i)the profit maximizing level of output, the profit maximizing price, the consumers surplus, the monopoly profits, the burden of monopoly (deadweight
loss)
ii)Squirell Inc. loses a legal battle and as a result has to pay licensing fee of $700 per
year to Jiffy Ltd. Its total costs therefore increase to TC = 10y + 700. With this new cost function, once again calculate: the profit maximizing level of output, the profit maximizing price, the consumers surplus, the monopoly profits, the deadweight loss.
iii)Are your answers the same as in part (a)or different? Explain why.

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Q96 Q96 Q96

Consider a monopoly with inverse demand function p = 90 - 10y and cost function c (y)= 10y.
i)Find the profit maximizing output and price, and calculate the monopolist's profits.
ii)Now, suppose the government imposes a per unit tax t = 20. Find the new price, output and profits.

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Q98 Q98 Q98

Consider a monopoly with inverse demand function p = 24 - y and cost function c(y)= 5y

^{2 }+ 4: i)Find the profit maximizing output and price, and calculate the monopolist's profits. ii)Now consider the case in which the monopolist has now another plant with the cost structure c_{2}(y_{2})= 10y_{2}. How much will the monopolist produce in each plant, what is the price, and the total profits of the monopoly? iii)Now suppose there is a technological change in the first plant and it has the following cost function: c_{1}_{ }(y_{1}) = 2y_{1}. How much will the monopolist produce in each plant and what is the price?Free

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