1. A firm owns a mineral spring in an area where no other source of water is
available. It can produce indefinitely once certain pipes are installed and have the possibility of selling mineral water to the domestic and foreign markets. The domestic and foreign demands are Qd = 21- 0.1Pd and Qf = 50 - 0.4Pf respectively. The total cost of the plant installation is TC = 2000 + 10Q where Q = Q d + Qf . What prices will the producer charge in order to maximize profit : a. with discrimination between markets? b. without discrimination? c. Which policy is better from the perspective of the firm? 2. Suppose a discriminating monopolist is selling a product in two separate markets in which demand functions are P1 = 12 – Q1 and P2 = 20 – Q2. The cost function of the monopolist is C = 3 + 2Q. As an economic advisor, you are asked to determine the price to be charged in the two markets and amount of output to be sold in each market so that profits are maximized. You are also asked to calculate the total profits to be made from the strategy. What advise will you give regarding price discrimination and non-discrimination? 3. Consider that a monopolist sells in two markets and has constant marginal cost equal to $2 per unit. The demand equations for two markets are: PI = 14 -2QI and, P2 = 10 –Q2 a) Find profit maximizing prices, quantities and combined revenue from both markets under the condition of price discrimination. b) What are the profit maximizing price, quantity and total revenue without price discrimination? 4. A monopolist sells its product in two markets with the following demand functions and the total cost function: Demand function in Market 1: Q1 = 1200 – 10P1 Demand function in Market 2: Q2 = 1500 – 20P2 Total cost function: TC = 500 + 20Q. Requirements: a. Determine the optimal prices and quantities for each market under the policy of price discrimination. b. Calculate price elasticity of demand for each market at the activity levels identified in part (a). Are the differences in the elasticity consistent with your recommended price differences? Why or why not? c. Suppose that the monopolist drops the two-tier pricing and offers uniform price in both markets. Determine the equilibrium price and output. d. Which policy (two-tier pricing policy or uniform pricing policy) would you suggest to the monopolist?
5. Suppose that Pokhara University wants to reduce the athletic department’s
operating deficit and increase student attendance at home football games. To achieve these objectives, a new two-tier pricing structure for season football tickets is being considered. A market survey conducted by Pokhara University suggests the following market demand equations: Public demand: Qp = 90000 – 200Pp Student demand: Qs = 200000 – 800Ps During recent years, the football program has run on an operating budget of Rs.1.5 million per year. The budget covers fixed salary, recruiting, insurance and facility maintenance expenses. University incurs variable ticket handling, facility cleaning expenses and security cost of Rs.25 per season ticket holder. The resulting total cost function is TC = 1500000 + 25Q. Requirements: a. Determine the optimal ticket prices and quantities for each market, assuming that the university adopts a new season ticket pricing policy featuring student discounts. b. Calculate price elasticity for each group at the activity levels identified in part (a). Are the differences in the elasticity consistent with your recommended price differences? Why or why not? c. Suppose that the university drops the two-tier ticket pricing and offers uniform price to both students and general public. Determine the equilibrium price and output of these activity levels. d. Which policy (two-tier pricing policy or uniform pricing policy) would you suggest to the university?
Production of Bioplastic Products. Biodegradable and Bio-Plastics Products Manufacturing Business. Glasses, Plates and Bags Manufacturing Project.-207549 PDF