Learning Materials
Features
Discover
Chapter 10: Labor demand (page 369)
How does a change in the demand for a product affect the demand for labor?
law of demand
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Suppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of \(40 per unit.
a. If the elasticity of demand for the product is -2, find the marginal cost of the last unit produced.
b. What is the firm鈥檚 percentage markup of price over marginal cost?
c. Suppose that the average cost of the last unit produced is \)15 and the firm鈥檚 fixed cost is $2000. Find the firm鈥檚 profit.
A drug company has a monopoly on a new patented medicine. The product can be made in either of two plants. The costs of production for the two plants are MC1 = 20 + 2Q1 and MC2 = 10 + 5Q2. The firm's estimate of demand for the product is P = 20 - 3(Q1 + Q2). How much should the firm plan to produce in each plant? At what price should it plan to sell the product?
A certain town in the Midwest obtains all of its electricity from one company, Northstar Electric. Although the company is a monopoly, it is owned by the citizens of the town, all of whom split the profits equally at the end of each year. The CEO of the company claims that because all of the profits will be given back to the citizens,it makes economic sense to charge a monopoly price for electricity. True or false? Explain.
In some cities, Uber has a monopoly on ride-sharing services. In one town, the demand curve on weekdays is given by the following equation: P = 50 - Q. However, during weekend nights, or surge hours, the
demand for rides increases dramatically and the new demand curve is: P = 100 - Q. Assume that marginal cost is zero.
a. Determine the profit-maximizing price during weekdays and during surge hours.
b. Determine the profit-maximizing price during weekdays and during surge hours if MC = 10 instead of zero.
c. Draw a graph showing the demand, marginal revenue, and marginal cost curves during surge hours from part (b), indicating the profit-maximizing price and quantity. Determine Uber鈥檚 profit and the deadweight loss during surge hours, and show them on the graph.
There are 10 households in Lake Wobegon, Minnesota, each with a demand for electricity of Q = 50 - P. Lake Wobegon Electric鈥檚 (LWE) cost of producing electricity is TC = 500 + Q.
a. If the regulators of LWE want to make sure that there is no deadweight loss in this market, what price will they force LWE to charge? What will output be in that case? Calculate consumer surplus and LWE鈥檚 profit with that price.
b. If regulators want to ensure that LWE doesn鈥檛 lose money, what is the lowest price they can impose? Calculate output, consumer surplus, and profit. Is there any deadweight loss?
c. Kristina knows that deadweight loss is something that this small town can do without. She suggests that each household be required to pay a fixed amount just to receive any electricity at all, and then a per-unit charge for electricity. Then LWE can break even while charging the price calculated in part (a). What fixed amount would each household have to pay for Kristina鈥檚 plan to work? Why can you be sure that no household will choose instead to refuse the payment and go without electricity?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine