Exam 23: Monopoly

A monopolist with constant marginal costs faces a demand curve with a constant elasticity of demand and does not practice price discrimination. If the government imposes a tax of $1 per unit of goods sold by the monopolist, the monopolist will increase his price by more than $1 per unit.

A computer software firm has developed a new and better spreadsheet program. The program is protected by copyrights, so the firm can act as a monopolist for this product. The demand function for the spreadsheet is q = 50,000 - 100p. Any single consumer will want only one copy. The marginal cost of producing and distributing another copy and its documentation is just $10 per copy. If the company sells this software at the profit-maximizing monopoly price, the number of consumers who would not buy the software at the monopoly price but would be willing to pay at least the marginal cost is

The demand for a monopolist's output is 10,000 divided by the square of the price it charges. The monopolist produces at a constant marginal cost of $5. If the government imposes a sales tax of $10 per unit on the monopolist's output, the monopolist price will rise by

In some parts of the world, Red Lizzard Wine is alleged to increase one's longevity. It is produced by the process Q = min{ ( )L, R}, where L is the number of spotted red lizards and R is gallons of rice wine. P_L = P_R = $1. Demand for Red Lizzard Wine in the United States is Q = . If the advertising budget is $121, the quantity of wine which should be imported into the United States is

An industry has two firms, a leader and a follower. The demand curve for the industry's output is given by p = 208 - 4q, where q is total industry output. Each firm has zero marginal cost. The leader chooses his quantity first, knowing that the follower will observe the leader's choice and choose his quantity to maximize profits, given the quantity produced by the leader. The leader will choose an output of

The demand for Professor Bongmore's new book is given by the function Q = 2,000 - 100p. If the cost of having the book typeset is $7,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits by

A firm has discovered a new kind of nonfattening, non-habit-forming dessert called zwiffle. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwiffle could be produced, the firm would have to spend a fixed cost of $F. Demand for zwiffle is given by the equation q = 20 - p. The firm has a patent on zwiffle, so it can have a monopoly in this market.

If he produces anything at all, a profit-maximizing monopolist with some fixed costs and no variable costs will set price and output so as to maximize revenue.

A monopolist faces the inverse demand curve p = 120 - 6q. At what level of output is his total revenue maximized?

An obscure inventor in Strasburg, North Dakota, has a monopoly on a new beverage called Bubbles, which produces an unexplained craving for Lawrence Welk music. Bubbles is produced by the following process: Q = min{ , W}, where R is pulverized Lawrence Welk records and W is gallons of North Dakota well water. P_R = P_W = $1. Demand for Bubbles is Q = 1,024P^-2A^0.5. If the advertising budget for Bubbles is $100, the profit-maximizing quantity of Bubbles is

A monopolist has constant marginal costs of $1 per unit. The demand for her output is if p is less than or equal to 50. The demand is 0 if p > 50. What is her profit maximizing level of output?

A major software developer has estimated the demand for its new personal finance software package to be Q = 1,000,000P^-2 while the total cost of the package is C = 100,000 + 25Q. If this firm wishes to maximize profit, what percentage markup should it place on this product?

A monopolist produces at a point where the price elasticity of demand is -0.7 and the marginal cost is $2. If you were hired to advise this monopolist on how to increase his profits, you would find that the way to increase his profits is to

A profit-maximizing monopolist has the cost schedule c(y) = 40y. The demand for her product is given by , where p is her price. Suppose that the government tries to get her to increase her output by giving her a subsidy of $21 for every unit that she sells. Giving her the subsidy would make her

The demand for a monopolist's output is , where p is the price it charges. At a price of $3, the elasticity of demand for the monopolist's output is

The demand curve facing a monopolist is D(p) = if p is 20 or smaller and D(p) = 0 if p > 20. The monopolist has a constant marginal cost of $1 per unit produced. What is the profit-maximizing quantity of output for this monopolist?

A profit-maximizing monopolist faces the demand curve q = 100 - 3p. It produces at a constant marginal cost of $20 per unit. A quantity tax of $10 per unit is imposed on the monopolist's product. The price of the monopolist's product

A profit-maximizing monopolist faces a demand function given by q = 1000 - 20p, where p is the price of her output in dollars. She has a constant marginal cost of 20 dollars per unit of output. In an effort to induce her to increase her output, the government agrees to pay her a subsidy of $10 for every unit that she produces. She will

A monopolist faces a constant marginal cost of $1 per unit and has no fixed costs. If the price elasticity of demand for this product is constant and equal to -3, then

A monopolist receives a subsidy from the government for every unit of output that is consumed. He has constant marginal costs and the subsidy that he gets per unit of output is greater than his marginal cost of production. But to get the subsidy on a unit of output, somebody has to consume it.