View the step-by-step solution to:

Econ 101 Problem Set 1 Due Monday Jan. 16 in class 56 pts total. 6 pts extra credit. 1. (12 pts) A monopolist faces a market demand curve given by: Q...

I am having trouble with this problem set for my Intermediate economics course. Could I get an in depth explanation as to how to solve these questions? Thank you in advance.
Econ 101 Problem Set 1 Due Monday Jan. 16 in class 56 pts total. 6 pts extra credit. 1. (12 pts) A monopolist faces a market demand curve given by: Q = 240 - P and a cost function of C ( Q ) = 10 + 40 Q + Q 2 (a) (4 pts) Find the profit maximizing quantity and price. Calculate the monopoly’s profits and consumer surplus. (b) (5 pts) What price and output level would have been produced by this industry under perfect competition ( P = MC )? Calculate consumer surplus and firm profits at the competitive output level. Calculate the deadweight loss due to monopoly. (c) (2 pts) Suppose the government wanted use a per-unit subsidy of $ S to incentivize the monopolist at the competitive output level. What is the value of $ S and how much would the total subsidy cost? (d) (1 pt) Would you recommend for or against using the subsidy as an incentive to produce at the competitive level? 2. (8 pts - 2 each) Label the following practices as first, second or third degree price discrimination (or not price discrimination) (a) An airline charges fees for customers who check in bags 1
Background image of page 1
(b) A fast food restaurant lets you double the size of your drink for only 20 cents more (c) A college charges lower tuition to an economically disadvantaged student (d) A grocery store mails out coupon fliers 3. (14 pts) Oceanic Airlines is the sole provider of flights to and from Dharma Island. They face two types of customers: business travelers and leisure travelers. The demand by business travelers is: Q B = 100 - P B and the demand by leisure travelers is: Q L = 400 - 4 P L The cost function is: C ( Q ) = 1 10 Q 2 + 10 Q + 50 (a) (5 pts) Suppose that Oceanic cannot distinguish between the two types of travel- ers. Calculate the profit maximizing price and quantity. Calculate profit and the consumer surplus for each type of traveler. (b) (2 pts) Oceanic wants to distinguish between business and leisure travelers by charging more for customers who show up at the airport wearing a suit and carrying a laptop bag or briefcase. What might go wrong with this plan? Propose an alternative strategy for Oceanic to distinguish between business and leisure travelers. (c) (7 pts) Suppose now that Oceanic can distinguish between the two types of trav- elers and that they can prevent resale of tickets. Calculate the profit maximizing prices and quantities for each type of traveler. Calculate profit and consumer surplus for each type of traveler. 4. (12 pts) You provide homework solving services to your two “friends”, Alice and Bob. Their demand for homework solutions are: P A = 100 - 2 Q A and P B = 100 - Q B 2
Background image of page 2
Show entire document
Sign up to view the entire interaction

Top Answer

HI Please find revise solution attached. For Q2 I dont see any... View the full answer

8422727-revised.doc

Q1 a. equate MR to MC TR= P*Q = 240Q -Q^2 MR= 240-2Q MC= 40+2Q 240 -2Q =40 +2Q Q= 50 and P= 240-50 =190 TR=190*50= 9500 TC= 10 +40*50 +50*50 = 4510 Profits= 4990 CS= *(240-190) *50 = 1250 b. equate...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online