Exercises on Monopoly: ECOS56 . Dr. Leona Williams, a well-known plastic surgeon, has a reputation for being one of the best surgeons for‘reconstructive nose surgery. Dr. Willams enjoys a rather substantial degree of market power in this market. Dr. Willams has estimated demand for her work tobe Q=480-0.2P Where Q is the number of nose operations performed monthly and P is the price of a nose operation. The average variable cost function for reconstructive nose surgery is estimated to be : AVC = 150 + 400 The doctor's fixed each month are RM8,000 @) If the doctor wishes to maximize her profit, how many nose operations should she perform each month? b) What price should Dr. Williams charge to perform a nose operation? ©) How much profit does she earn 'each month? .. The Golden Crown Hotel is planning to use price discrimination between corporate and general room’rates. For a standard deluxe room, its estimated demand curve for the General market: - 4,469 - 20/4 For the corporate market, its estimated demand curve is: Q, = 6,500 — 50P, In both equations, Q represents monthly quantity of rootfis and P represents price per night. The hotel's total cost is: TC = 110,000 + 30@ + 0.010, a) With price discrimination, how many rooms will be rented in each market? b) What price will the hotel charge in each market? ©) What will be the hotel's monthly profit? ) Will the price be higher if the hotel did not practice discrimination? |. The Saga Food Company produces one type of Frozen Food dinner sold directly to consumers and restaurants. The demand function for Saga’s Frozen dinner by ‘consumers (market1) and restaurant (market 2) are respectively. = 160-10P; Q, = 200 - 20P, ‘Saga’s total cost function is TC = 120+ 4Q ‘Show that if different prices are charged in market 1 and market 2, greater profits will result than if @ uniform price is charged. Exercises on Monopoly: ECOSS61 Exercises for Oligopoly Market: ECO556 ‘The research department of Wilson computers has estimated that the demand functions facing the firm for price increases and price decreases from the prevailing price are: Q,= 450-5P; for price increase Q, = 300-3P, for price decrease The firm's total cost function is estimated to be: TC = 50 + 30Q + 0.10? a) Derive the MR1, MR2 and MC functions facing the Oligopolist. b) Determine the price and quantity demanded at the kink. ¢) Referring to (b) above, are these the profit-maximizing price and quantity? Explain why or why not. 4) How much could marginal costs rise before the optional price would increase? How much could they fall before the optional price would decrease? ) Draw a diagram showing the demand, marginal revenue and marginal costs curves of the above Oligopolist. ) Referring to the diagram in (e), explain why the demand curve takes the shape indicated above. 9) Give three examples of non-price competition which an Oligolist may engage in order to increase his market share. An a) Compute the price level and output at the kinked b) Find the value of MR, and MR; at the kink, ©) Ifthe marginal coats is constant at RM15 at all levels of output, with the aid of diagram, determine: i, The output rate produced by the firm and ji, The price charged for the product. Suppose that Arian Space Inc., is an Aerospace contractor in an Oligopolistic industry. Arian Space Inc., faces a kinked demand curve for its product, which is defined by the ‘equation: Arian Space Inc., has constant marginal cost MC= RMS50. a) Calculate the equilibrium price and quantity for Arian Space Inc. product. b) Calculate the Arian Space's profit. ©) Determine the range of values within which marginal cost varies without affecting the prevailing market price and output level. d) Draw the diagram based on your calculation above. Exercises for Olgopoly Market: ECO5SS