Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

answer all parts please! Problem 3: Monopoly Power, Continuously A monopoly producer of How To Get Into Stanford tutorial videos has marginal costs that are

answer all parts please!

image text in transcribed
Problem 3: Monopoly Power, Continuously A monopoly producer of \"How To Get Into Stanford\" tutorial videos has marginal costs that are given by MC =20 + 1/4 Q, and the market demand from high school students for such videos is given by Q"=120-2P (which can also be written as P=60 1/2 Q"). Using the \"same intercept, twice the slope\" rule, this monopolist knows that her marginal revenues are MR=60-Q. Assume that fractional or decimal quantities of videos are possible, 7.e. use smooth curves in your analysis. a) How many videos will this monopolist produce? What will be the (single) price per video? Illustrate your answer with a diagram showing demand, MR, and MC curves. b) Compute the consumer surplus and producer surplus associated with your answer to part a), and indicate them on your diagram. How large is the deadweight loss associated with monopoly power? Show your work. ) Confirm that the \"inverse elasticity pricing rule\" holds for this monopolist: that is, that (P-MC) / P = 1/ [AQ"/AP x P/Q] where AQP/AP is measured in absolute value (so it's a positive, not a negative, number). Show your work. d) Show how after selling videos at the price and quantity you computed in part a) the monopolist can increase producer surplus by selling a few additional units to high school students who did not already buy. Plug in numbers (note that there are multiple correct answers) to propose a specific price and quantity of additional videos, and compute the effect on producer surplus and consumer surplus. ) Inwords, briefly explain why some monopolists may prefer to maintain a \"single-price strategy rather than selling additional units such as you described part d)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics

Authors: Robert Pindyck, Daniel Rubinfeld

9th Edition

0134184246, 9780134184241

More Books

Students also viewed these Economics questions

Question

2. What do the others in the network want to achieve?

Answered: 1 week ago

Question

1. What do I want to achieve?

Answered: 1 week ago