Monopoly and Monopolistic Competition Module Exercise: 1. Why is the monopoly' s marginal revenue decreasing? 2. Why does monopoly inefciency arise? represent graphically the excessive load or loss of efciency that a monopoly causes. 3. Give an example of price discrimination. 4. Johnny Rockabilly has just recorded his latest CD. The \"marketing\" department of your record company notes that the demand for the CD is as follows: Number of CD's 10,000 20 000 30.000 40 000 50.000 14 60,000 The company can produce the CD at no xed cost and at a variable cost of $5.00 per unit. CD. a. Find the total income corresponding to an amount equal to 10,000, 20,000, etc. What is the marginal revenue for each increase in the quantity sold by 10,000? b. What amount of CD would maximize prots? What would be the price? And the benets? c. If you were Johnny's manager, how much would you advise him to ask the record company for recording rights? Why? 5. Lazaro, Curro and Monica manage the only tavern in town. Lazaro wants to sell as many drinks as possible without losing money. Curro wants the tavern to generate as much income as possible. Monica wants to get as much prot as possible. Use a single graph of the tavern's demand and cost curves to show the combinations of price and quantity advocated by each of the three partners. Explain your answer. 6. Professor Bong has just determined a book on \"Esoteric Economics\". The expected demand for his book is represented by the equation Q = 2,000 100P. The cost of preparing the book, which must be incurred before any unit of the book is sold, is $1,000. Each copy of the book has a marginal cost of $4. Determine: a. The function for the demand curve for Professor Bong's books. b. the total income function e. the marginal revenue function. (1. The full cost function e. The number of books that will maximize the teacher's prot F. The price at which the books will be sold. g. The prots that will be generated 'om the sale of the book 7. Sparkles is one of many companies in the toothpaste market, each selling a similar but not identical product. It is in long-run equilibrium. a. Plot your demand, marginal revenue, marginal cost, and average total cost curves on a graph. In it indicate the level of production that maximizes prot and the corresponding price. b. What is the gain of Flashes? Explain your