Exam 12: Pricing and Advertising

Suppose a monopolist is considering starting a $500,000 advertising campaign.The current demand for its product is given by p = 150 - 3Q where Q is the quantity of output in thousands.If the monopolist undertakes the advertising campaign,it expects demand to increase to p = 200 - 4Q The (non-advertising)cost for the monopolist is C(Q)= 30Q. a.Determine whether the monopolist should undertake the advertising campaign assuming that it is correctly anticipating the potential increase in demand. b.What is the most the monopolist will invest towards this advertising campaign?

-The above figure shows the market for a particular good.If the market is controlled by a perfect-price-discriminating monopoly,the deadweight loss equals

A perfect price discriminating equilibrium maximizes

12.3 Group Price Discrimination -Bob is the only carpet installer in a small isolated town.The above figure shows the demand curves of two distinct groups of customers-residential and business.If the marginal cost of installing carpet is a constant $1 per sq yard,what price does Bob charge each segment?

Indoor Life,a TV periodical sells subscriptions (Q)and advertising spaces (N).The demand curve for subscriptions is p = 50 - 0.002Q - 0.001N² The magazine has negligible costs of printing and writing (the editor basically sits at home and watches TV),so the production costs are said to be zero. The advertising is sold in a competitive market.The price advertisers pay (per unit of N)is based on the number of subscriptions the magazine sells times 0.001.Thus the market price for advertising spots can be represented with the equation: pN = 0.01Q Compute the optimal number of subscriptions and advertisements for the magazine.

Suppose a monopoly produces film and cameras.Consumers demand pictures,which require film and one camera.Two different types of consumers have the following demand for film,qA = 100 - 10p and ?qB = 80 - 10p.The monopoly cannot price discriminate in the market for film or the market for cameras,but it can bundle the products.The monopoly produces film at a constant marginal cost of $1 per roll.What price will the monopoly set for film and for cameras?

Suppose all individuals are identical,and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month.The firm faces a constant marginal cost of $1.The profit maximizing two-part tariff yields results in the firm selling

A weapons producer sells guns to two countries that are at war with each other.The guns can be produced at a constant marginal cost of $10.The demand for guns from the two countries can be represented as: QA = 100 - 2p QB = 80 - 4p Why is the weapons producer able to price discriminate? What price will it charge to each country?

If a market is controlled by a perfect-price-discriminating monopoly,then

Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.

If Ben values good X more than good Y,and Catherine values good Y more than good X,a firm can increase its profits by

Suppose group price discrimination is possible; however,a firm sets the same price in each market.As a result,

For the following, please answer "True" or "False" and explain why. -Two-part tariffs allow the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.

Can a perfectly competitive firm successfully price discriminate? Hint: What does the demand curve look like for a perfectly competitive firm?

For the following, please answer "True" or "False" and explain why. -For a theme park a two-tier tariff can include a positive admission price and a zero per-ride fee.

The more block prices a monopoly can set instead of setting a single price,the

Perfect price discrimination is

Theatres charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because

"Kids eat free" in a fast food restaurant is an example of

The deadweight loss generated by a perfect-price-discriminating monopoly