Question

Pure Monopoly 25 100 90 80 O 70 0.14 polnts Print MC-ATC O 40 O 20 10 MR 10 20 30 40 50 60 70 80 90 100 Quantity Suppose the firm does not have the ability to price discriminate Instructions: Enter your answers as a whole number. a. The firm will charge $ b. The firm will generate profits of $ 625 Suppose instead the firm has the ability to first-degree price discriminate C. The firm will generate profits of $ 65 and sell 25 units Mc Graw KPrev 25 o

Answer 1

In a pure monopoly market, the firm will charge a price that maximizes its profits. This occurs when the firm sets its price equal to the marginal cost (MC) at the quantity where marginal revenue (MR) equals MC. If the firm has the ability to price discriminate, it can charge different prices to different customers and potentially generate higher profits.

Step-by-step explanation:

In a pure monopoly market, the firm will charge a price that maximizes its profits. This occurs when the firm sets its price equal to the marginal cost (MC) at the quantity where marginal revenue (MR) equals MC. Based on the given information, the profit-maximizing quantity is 40 and the firm will charge $16 per unit.

Therefore, the firm will generate profits of $640 (40 units x $16 per unit) in this scenario.

If the firm has the ability to first-degree price discriminate, it can charge different prices to different customers based on their willingness to pay. In this case, the firm will be able to generate profits of $65 and sell 25 units.

Answer 2

a) the firm will charge $98.88. b) the firm's profits are π = TR - TC = 6,173.50 - 5,546.88 = $626.62. c) the firm will generate profits of $65 and sell 25 units under first-degree price discrimination.

a. The firm will charge $98.88.

The demand function for the firm is given by Q = 100 - 0.14P, and the marginal revenue function is MR = 100 - 0.28P.

The marginal cost function is MC = 25 + 10Q.

Setting MR equal to MC, we get:

100 - 0.28P = 25 + 10Q

Solving for Q, we get:

Q = 62.5 - 0.14P

Substituting this expression for Q into the demand function, we get:

100 - 0.14P = 62.5 - 0.14P

Solving for P, we get:

P = 98.88

Therefore, the firm will charge $98.88.

b. The firm will generate profits of $625.

The total revenue is TR = PQ, where P is the price and Q is the quantity. Plugging in the values, we get:

TR = 98.88 * 62.5 = 6,173.50

The total cost is TC = MCQ, where MC is the marginal cost and Q is the quantity. Plugging in the values, we get:

TC = (25 + 10 * 62.5) * 62.5 = 5,546.88

Therefore, the firm's profits are π = TR - TC = 6,173.50 - 5,546.88 = $626.62.

c. The firm will generate profits of $65 and sell 25 units.

Under first-degree price discrimination, the firm can charge each customer their maximum willingness to pay. The maximum willingness to pay for each customer is given by the demand function: Q = 100 - 0.14P.

The firm can maximize its profits by charging each customer their maximum willingness to pay. This means that the firm will charge each customer a price equal to their individual demand

Therefore, the firm will generate profits of $65 and sell 25 units under first-degree price discrimination.