MICROECONOMICS THEORY

1. A movie monopolist sells to college students and other adults. The demand function for students is   Qds = 880 – 100p        and the demand function for other adults is      QdA = 1,800 – 100p     Costs is        C(Q) = 1Q + 0.005Q²ᵐ per ticket where Q = QS + QA.   Instructions: Round your answers to 2 decimal places. a. What prices will the monopolist set when she can discriminate?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. b. What if demand for adults increases to         QdA = 2,000 – 100P?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. c. When adult demand increases, the adult price:

	increases.
	does not change.
	decreases.

d. When adult demand increases, the student price:

	decreases.
	does not change.
	increases.

2. A movie monopolist sells to college students and other adults. The demand function for students is           Qds = 1,480 – 100P and the demand function for other adults is         QdA = 2,000 – 100P  but who has cost function

C(Q) = Q +0.005Q2

Marginal cost is           MC = 1 + 0.01Q where Q = QS + QA.   Instructions: Round your answers to 2 decimal places as needed. a. What prices will the monopolist set when she can discriminate?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. b. What if demand for adults increases to         QdA = 2,200 – 100P?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. c. When adult demand increases, the adult price:

	decreases.
	does not change.
	increases.

d. When adult demand increases, the student price:

	increases.
	decreases.
	does not change.

 

 

3. A movie monopolist sells to college students and other adults, as in Worked-Out Problem 18.2 (page 635). The demand function for students is           Qds = 800 – 100P and the demand function for other adults is           QdA = 3,500 – 100P Marginal cost is $2 per ticket.   Instructions: Round your answers to 2 decimal places. a. What prices will the monopolist set when she can discriminate? How will discrimination affect the monopolist’s profit?          Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. b. What prices will the monopolist set when she cannot discriminate? How will it affect her profit?     Peveryone = $ per ticket.     Profit = $.

 

 

 

 

 

 

 

4. Suppose there are 5 types of consumers: Type A, Type B, Type C, Type D, and Type E. There are 2,000 of each type. Two software products are sold by a monopolist: spreadsheets and word processing. Assume the marginal cost of production is $0.

	Willingness to Pay
Consumer Type	Number	Spreadsheet	Word Processor	Both
A	2,000	800	0	800
B	2,000	280	120	400
C	2,000	200	200	400
D	2,000	120	280	400
E	2,000	0	800	800

Instructions: Round your answers to the nearest whole number. a. What will be the profit-maximizing bundle price?     $. b. What is profit at this pricing policy?     $. c. How will profit from this pricing policy compare to profit under independent pricing of the two goods?     When pricing independently, the profit-maximizing price for spreadsheets is $ and the profit-maximizing price for word processing is $. d. What is profit under independent pricing?     $.

 

 

 

 

 

 

 

 

 

 

5. A movie monopolist sells to college students and other adults, as in Worked-Out Problem 18.2 (page 635). The demand function for students is          Qds = 1,600 – 100P and the demand function for other adults is          QdA = 2,400 – 100P Marginal cost is $3 per ticket (instead of $2 per ticket, as in the Worked-Out Problem).   Instructions: Round your answers to 2 decimal places. a. What prices will the monopolist set when she can discriminate? How will discrimination affect her profit?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. b. What prices will the monopolist set when cannot discriminate? How will it affect her profit?     Peveryone = $ per ticket.     Profit = $.

 

 

 

 

 

 

 

 

 

 

 

6. Suppose the demand functions facing a wireless telephone monopolist are          QdL = 70 – 200P for each low-demand consumer and           QdH = 160 – 200P for each high-demand consumer, where P is the per-minute price in dollars. The marginal cost is $0.02 per minute. Suppose the monopolist offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too that for any per-minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan’s per-minute price; and that the high-demand plan has a per-minute price of $0.02 per minute and a fixed fee that leaves the high-demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 200 high-demand consumers and 300 low-demand consumers. Will the monopolist’s profit be higher when the per-minute price in the low-demand plan is $0.07 or $0.12? Instructions: Round your answers to 2 decimal places as needed. a. Suppose the monopolist’s per-minute price in the low-demand plan is $0.07.          Profit = $. b. Now suppose the monopolist’s per-minute price in the low-demand plan is $0.12.     Profit = $.

 

 

 

 

 

 

 

 

 

 

 

7. A movie monopolist sells to college students and other adults. The demand function for students is           Qds = 1,640 – 100P and the demand function for other adults is           QdA = 2,000 – 100P Costs is           C(Q) = 1 Q + 0.005²ᵐ per ticket where Q = QS + QA.   Instructions: Round your answers to 2 decimal places. a. What prices will the monopolist set when she can discriminate?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. b. What if demand for adults increases to         QdA = 2,200 – 100P?     Pstudent = $ per ticket.     Padult = $ per ticket.       Profit = $. c. When adult demand increases, the adult price:

	increases.
	decreases.
	does not change.

d. When adult demand increases, the student price:

	decreases.
	increases.
	does not change.

8. Juan’s demand for ice cream from the Ice Cream Monopoly Company is illustrated in the figure below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The marginal cost of producing ice cream cones is $1.00. Suppose the Ice Cream Monopoly Company sells to Juan using a two-part tariff with a per-cone price of $1.00. Instructions: Round your answers to 2 decimal places as needed. a. What is the largest fixed fee it can charge Juan and still persuade Juan to make a purchase?     $. b. How does its total revenue from Juan under this two-part tariff compare to its total revenue from Juan when it sells Juan 6 ice cream cones, each priced at Juan’s willingness to pay for it (on a cone-per-cone basis)?

Under this two-part tariff, what is its total profit from Juan?       TR = $.     Profit = $.