A nondiscriminating profit maximizing monopolist. Chapter 9 Flashcards 2022-10-27
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A monopolist is a firm that is the sole provider of a good or service in a particular market. In economics, profit maximization is the process of obtaining the highest possible profit by choosing the optimal output level and price for a product.
A nondiscriminating profit maximizing monopolist is a firm that does not discriminate between its customers and maximizes its profits by setting a single price for all of its customers. This means that the monopolist does not charge different prices for the same product or service to different customers based on factors such as their location, income, or other personal characteristics.
There are several arguments in favor of a nondiscriminating profit maximizing monopolist. First, it is more efficient for the monopolist to set a single price for all customers, rather than engaging in the costly and time-consuming process of setting different prices for different customers. This allows the monopolist to focus on production and distribution, rather than on price discrimination.
Second, a nondiscriminating profit maximizing monopolist may be seen as more fair and just, as it does not discriminate between its customers based on arbitrary factors. This can help to build trust and goodwill among customers, which can be beneficial for the monopolist in the long run.
However, there are also some potential drawbacks to a nondiscriminating profit maximizing monopolist. One concern is that the monopolist may be able to charge higher prices than would be possible in a competitive market, leading to higher costs for consumers. Additionally, the monopolist may have less incentive to innovate and improve the quality of its products or services, as it does not face competition.
In conclusion, a nondiscriminating profit maximizing monopolist is a firm that does not discriminate between its customers and maximizes its profits by setting a single price for all of its customers. While this approach has some benefits, it also has the potential to lead to higher prices and reduced innovation.
Profit Maximization for a Monopoly
Marginal revenue is related to the price elasticity of demand — the responsiveness of quantity demanded to a change in price. The commodity involved must be a durable good. Patents reduce a firm's incentive to develop new products. The only bank in a small town. How do you find what price will maximize profit? To understand why, think about increasing the quantity along the demand curve by one unit, so that you take one step down the demand curve to a slightly higher quantity but a slightly lower price.
A nondiscriminating monopolists demand curve A is horizontal at the market price
Costs and Revenues of HealthPill Quantity MC 1 1,200 1,200 500 500 2 2,200 1,000 775 275 3 3,000 800 1,000 225 4 3,600 600 1,250 250 5 4,000 400 1,650 400 6 4,200 200 2,500 850 7 4,200 0 4,000 1,500 8 4,000 —200 6,400 2,400 Notice that marginal revenue is zero at a quantity of 7, and turns negative at quantities higher than 7. For a purely competitive firm: a. We define it as marginal revenue minus marginal cost. Naija Edu Info is not affiliated with any of these institutions but provides credible information about them for your benefit. Where marginal revenue is zero, demand is unit price elastic. But a monopolist often has fairly reliable information about how changing output by small or moderate amounts will affect its marginal revenues and marginal costs, because it has had experience with such changes over time and because modest changes are easier to extrapolate from current experience.
But they also make the things they want more, and they also make the things they want cheaper. The demand curve faced by a purely monopolistic seller: A. The profit-maximizing output for this firm is M. They provide a stimulus to innovation. If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price: A. Will realize an economic profit if price exceeds ATC at the profit maximizing loss minimizing level of output? What is the profit maximizing monopolist? What if elasticity is greater than 1? In other words, total costs increase with output at an increasing rate.
What is price discrimination and how does price discrimination work? Baking supplies flour, salt, etc. At its profit-maximizing output, a pure nondiscriminating monopolist achieves: A. So what can a monopolist do to prevent profits from being maximized? A retailer, for example, might set different prices for products that it sells based on the demographics and location of its customer base. Why is knowledge of price elasticity of demand useful? A perfectly competitive firm acts as a price taker. They are all barriers to entry. Still, arguments over whether substitutes are close or not close can be controversial. What is the relationship between elasticity of demand and total revenue? In the HealthPill example in Figure 2, the highest profit will occur at the quantity where total revenue is the farthest above total cost.
They can price themselves out of the market because they make their products more expensive. But if buyers have a range of similar—even if not identical—options available from other firms, then the firm is not a monopoly. Each firm makes zero profit. A nondiscriminating profit-maximizing monopolist: a. Table 3 below repeats the marginal cost and marginal revenue data from Table 2, and adds two more columns. Raise price and raise output.
Discriminating Monopoly: Definition, How It Works, and Example
If that is so, then pure monopoly does not exist. When a firm is on the inelastic segment of its demand curve it can? Price is greater than marginal cost. There are several misconceptions about monopoly prices. Which of the following is true at the profit-maximizing quantity for both a perfectly competitive firm and a monopoly? Which of the following is correct? The company that made a profit while the market price was at its peak is a monopolist. Patents give a permanent exclusive right to produce a new good.
True or False: Refer to the diagram for a nondiscriminating monopolist. The profit
At an output of 5, marginal revenue is 400 and marginal cost is 400, so producing this unit still means overall profits are unchanged. Industry X is: a. Refer to the given data. Apartments with the same square footage and comparable amenities may come with drastically different pricing based on where they are located. The good or service cannot be profitably resold by original buyers. Price discrimination refers to: A.
The trading is performed to maximize the profit level. In this example, we give the output as 1, 2, 3, 4, and so on, for the sake of simplicity. Total costs for a monopolist follow the same rules as for perfectly competitive firms. For example, at an output of 4 in Figure 3, marginal revenue is 600 and marginal cost is 250, so producing this unit will clearly add to overall profits. The price of a brand-name prescription drug is higher than the price of a generic brand. They increase a firm's incentive to incur the up-front costs of developing new products. How Discriminating Monopolies Work A discriminating monopoly can operate in a variety of ways.
A nondiscriminating profit maximizing monopolist A will never produce in the
Lower price and raise output. In each market segment, price is determined by finding the level of output where that market's a. Price must be at least equal to average total cost. Price equals marginal cost. Price must be equal to or greater than minimum average variable cost for the firm to continue producing. The practice of price discrimination is associated with pure monopoly because: A.
Patent laws promote technical progress in all of the following ways except one. If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be: A. Marginal Revenue and Marginal Cost for the HealthPill Monopoly. In the short run, the Arf n' Barf should a. In a purely competitive industry: a. The company that made a profit while the market price was at its peak is a monopolist.