Monopoly Marginal Cost and Long Run Equilibrium Essay Sample free essay sample

Ajax cleansing Products is a medium sized operating in an industry dominated by one big house Tile King ; Ajax produces a multi-headed tunnel wall scrubber that is similar to a theoretical account produced by Title King to avoid the possibility of monetary value war. The monetary value charged by Title King is $ 20. 000. Ajax has the undermentioned short-term cost curve: TC = 800. 000 – 5. 000Q + 100Q^2 a ) Compute the fringy cost curve for Ajax reply: Fringy Cost ( MC ) = dTC/dQ Since the derived function of a changeless = 0.MC = -5. 000 + 200Q B ) Given Ajax pricing scheme. what is the fringy gross map for Ajax? Since Ajax is pricing as if it were a absolutely competitory house. so. it’s monetary value would be its fringy gross. therefore: P = MR = $ 20. 000 degree Celsius ) Compute the net income maximising degree of end product for Ajax: A net income maximising degree of end product would be achieved at the point where MR = MC We therefore have to put both maps equal each other and so work out for Q. We will write a custom essay sample on Monopoly: Marginal Cost and Long Run Equilibrium Essay Sample or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 20. 000 = -5000 + 200Q Solving for Q: 20000 + 5000 = 200Q 25. 000 = 200Q 25. 000/200 = Q 125 = Q 125 is the net income maximizing measure that Ajax would hold to bring forth in order to recognize the maximal net income possible. vitamin D ) Compute Ajax’s entire dollar net incomes: net income = TR – TC Net income = ( 20. 000*Q ) – ( 800. 000 – 5000Q + 100Q^2 ) Net income = ( 20. 000*125 ) – ( 800. 000 – 5000*125 + 100*125^2 ) Net income = 2. 500. 000 – ( 800. 000 – 625. 000 + 1. 562. 500 ) Net income = 2. 500. 000 – 1. 737. 500 Net income = $ 762. 5004. Alone creative activities hold a monopoly place in the production and sale of magnometers the cost map confronting Unique is estimated to be Fringy cost of unique is $ 20. 00 as a fringy cost is the cost that is incurred due to the addition of the cost divided by addition in the measure. Answer: Suppose that alone produces 10 unitsEntire cost: 100. 20020 Unit of measurements produced: 100. 400Increase in cost =8 100. 400-100. 200 =200Addition in quantity = 20-10 = 10Fringy cost is: 200/ 10 =206. Wyandotte chemical company sells assorted chemicals to the car industry Wyandotte presently sells 30. 000 gallons of polyol per twelvemonth at an mean monetary value of 15 per gallon. Fixed costs = 90. 000 Variable costs = 180. 000 The operations research section has estimated that a 15 per centum addition in end product would non impact fixed costs but would cut down mean variable costs by 60 cents per gallon. The market section has estimated the arc snap of demand for polyol to be -2. 0. *How much would Wyandotte hold to cut down the monetary value of polyol to accomplish a 15 % addition in the measure sold?*Evaluate the impact of such a monetary value cut on entire gross. entire cost. and entire net incomes. Chapter 12: Problems 1. 2 ( B ) . and 5 ( B )Assume that two companies ( A and B ) are duopolists who produce indistinguishable merchandises. Demand for the merchandises is given by the undermentioned additive demand map:P = 600 – Qc ? Qdwhere Qc and Qd are the measures sold by the several houses and P is the merchandising monetary value. Entire cost maps for the two companies areTCc = 25. 000 + 100QcTCD = 20. 000 + 125QD Assume that the houses act independently as in the Cournot theoretical account ( i. e. . each house assumes that the other firm’s end product will non alter ) .a. Determine the long-term equilibrium end product and merchandising monetary value for each house.B. Determine the entire net incomes for each house at the equilibrium end product found in Part ( a )Determine the long tally equilibrium end product and merchandising monetary value for each house. Solution: Q = Qc + Qd For Company C TRc = P*Qc = ( 600 – Qc – Qd ) Qc = 600 – Qc2 – Qd*Qc MRc = 600 – 2Qc – Qd MCc = 100 At long tally equilibrium. MR = MC 600 – 2Qc – Qd = 100 2Qc + Qd = 500————– ( 1 ) For Company D TRd = P*Qd = ( 600 – Qc – Qd ) Qd = 600 – Qc*Qd – Qd2 MRd = 600 – 2Qd – Qc MCd = 125 At long tally equilibrium. MR = MC 600 – 2Qd – Qc = 125 Qc + 2Qd= 475——— ( 2 ) Solving the two additive equation ( 1 ) and ( 2 ) . we get Qc = 175 and Qd = 150 Puting these values in monetary value equation. P = 600 – 175-150 P = $ 275 B. Determine the entire net incomes for each house at the equilibrium end product found in Part A 5. Alchem ( L ) is the monetary value leader in the polyglue market. all 10 other industries ( follower ( f ) houses ) sell polyglue at the same monetary value as Alchem. Established monetary value and supplies the balance of the demand itself. Entire demand for poly-glue I given by the undermentioned map ( Qr = QL + QF ) P = 20. 000? – 4QRAlchem fringy cost map for fabrication and selling poly-glue is MCL = 5000 + 5QL The aggregative fringy cost map for the other fabrication of poly-glue is MCf=2000+4Qf?To maximise net incomes how much poly-glue should Alchem green goods and what monetary value should it bear down? P* $ 9. 666. 70. Q* = 666. 7*What is the entire market demand for polyglue at the monetary value established by Alchem in Part ( a )*How much of entire demand do the follower houses provide?