Module 12 Homework
A monopoly producing a chip at a marginal cost of $6 per unit faces a demand elasticity of −2.5. Which price should it charge to optimize its profits?
$10 per unit
Suppose P = 20 − 2Q is the market demand function for a local monopoly. The marginal cost is 2Q. The local monopoly tries to maximize its profits by equating MC = MR and charging a uniform price. What will be the equilibrium price and output?
$13.33, 3.33 units
A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces an inverse demand function given by P = 50 − Q. The monopoly price is:
$30
You are the manager of a Mom and Pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is −4, then your profit-maximizing price is:
$4
A local video store estimates its average customer's demand per year is Q = 7 − 2P, and it knows the marginal cost of each rental is $0.5. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?
$9
You are the manager of a gas station and your goal is to maximize profits. Based on your past experience, the elasticity of demand by Texans for a car wash is −4, while the elasticity of demand by non-Texans for a car wash is −6. If you charge Texans $20 for a car wash, how much should you charge a man with Oklahoma license plates for a car wash?
18
Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?
P=MC
Cinemas sometimes give senior citizens discounts. What is the possible privately motivated purpose for them to do so?
Senior citizens have a more elastic demand for movies than ordinary citizens.
Which of the following is NOT a condition for a firm to engage in price discrimination?
The consumers are sincere in revealing their true natures.
Which of the following statements is true?
The more elastic the demand, the lower the profit-maximizing markup.
