Exercises for Monopoly & Oligopoly : ECOSS6 ~ 1, An amusement park, whose customer is made up of 2 markets, adults and children, has developed demand schedule as follows: Q = 20-Pa Qe = 30—2Pe ‘The marginal cost for operating each unit of quantity is RMS. Calculate the price, quantity and profit if, ’) the amusement park charges different price in each market the amusement park charges the same price in the two combined market i) should the park practice price discrimination? 2. Uncle John’s Fitness Center is planning to utilize price discrimination to set its family and corporate rates. For the family membership, its estimated demand curve is: Qr = 110—0.2Pr For the corporate membership, its estimated demand curve is: Qc = 240—0.8Pc Given TC = 10,000 + 50Q where Q is total number of members (Qe + Qc) and TC is Total Cost. i) __ Ifthis Center decides to practice price discrimination, calculate the amount of membership should it sell and how much fee should it charge for family market and corporate market. ii) Ifthe Center decides not to practice price discrimination, calculate the amount of membership should it sell and how much fee should it charge. iii) Should the Center practice price discrimination? 3. An oligopolistic firm has the following demand curve functions: P; = 54—1.8Q) P, = 60—2.4Q, i) Compute the price level and output at the kink. ii) If the MC is constant at 15 at all level of output, can it maintain the equilibrium price and output? Exercises for Monopoly n Oligopoly SIIFZOI0 doeSuggested Solutions Br Meonoge'y d Oliqepol. O41. Q=20-h& — YO Q. « 3-22 —— © me = 45 "y Adalt Market children _merket Soman mre ‘ 4 T maximizeh?o fo Adult met? T maxa for Children Met : find MRE S Find MRe 2 TR,= OQ ; The = 0.Q feo : BQ, = 20-CA : from ©: Qe = 30- 2(2 fa = 20-4 ! abe 38-Oe fo 2 1S - OS We = &.Q, TR Maen i a TR,= (2° -@a)-On a = 200, - On The = (15 -0-5@e Qe ea Tee 2 (SQ -o-SQC mk, = 414 = 20 -20h ‘A by =20-28A ne, = dike 2 IS ~ Qe we MOe 2 15 -Qe Then: ‘ Then 5 + 20-2@a 5s sis -@e1 C0) Clontiue) Adult mit children met ( 5 = 20-2ka : 5 215 -Qe = 20-5 ( BQ, = 20-8 ‘ Ossie t 2 1S i & 3 ‘ [Ge = io } q Bot is - 0S @e Poe 20-Da " 0, (7s) : k= je — O'S Cle) m7 20 - - ? ‘ - pene eee BE Ta —_— \ a" = (iRa- Te) + C%Re- TED W/ discrimination = (GO ~ 04) t (he-& ~¢-&) 2[Ci2-srC¥s) -xesY] + [CoMte)- Xe)] 2 [aes - 33s] + Ltco- so = 562s Ay |W yjoise. 2 4106. 25]BL Gi) Combined market : det m= tae whee Qu= Qat Ge Qu (20 -(4) + C20- 2h) Bor tale Qu = Qu = 5° — Gea — Ahem Qe = So - Blan 3lm = Se - Qa fn = S0— Oe 3 Pr = 166% — 0:33 Qn T mexn level of Qn * fon = 16.6% —O°33 Om Then = Vor Clan = (1664 — 0: 33Qm> Qn Thm = (6-64 Om — 0338 Qm Athen = 6.62% — 066 Gn “ABen "(WR = 16-67 —066AnQ4 Cit) Clontrnued ? S = 1bP- 0660 O66 Om = Ib 6PR-S Dn = U6? 0-66 bax = 16.67 — 0-23C17-68) Ir = 1667? — 5-84 0, = 410.84 TT be Porlned enorect 2 Ol tte of diserimeashen GF T= TR — Tom wile Dise. = fae Oe — C-Brr = C1084 CIF-68) — CEPCIF-69) = 14bls — BBY Te = # 103-25Qt citi) Should: the park pisctse Gace chcerimasnss ? ie #106. C46 25) > Tuto Dis w/ dis ., Cfloz.2s) D Since Tu) oS lacgec than T fo Dise. , the freee Choulel Qrackse Grice dAxcameashen +