Consider the market for iPads where demand is given by Q = 200 -0.2P Where quantity...
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Consider the market for iPads where demand is given by Q = 200 -0.2P Where quantity is measured in millions and price in dollars. Assume that the marginal cost of production for Apple is constant at $200 per unit with no fixed cost. a) Determine the profit maximizing price-quantity combination and the resulting profits. b) Calculate the Lerner Index for Apple's market power and estimate the elasticity of demand for iPads. c) Calculate consumer and producer surplus under market power. d) Suppose a $50 tariff (i.e., an import tax) is imposed all iPads when they enter the U.S. How will Apple's production decisions change? Did Apple gain or lose pricing power in response to the tax? e) Instead of a tariff, suppose the government set a price ceiling to maximize total surplus. Calculate the new price, quantity, profits, consumer surplus, and producer surplus. f) Calculate the deadweight loss due to the monopolistic market structure. Consider the market for iPads where demand is given by Q = 200 -0.2P Where quantity is measured in millions and price in dollars. Assume that the marginal cost of production for Apple is constant at $200 per unit with no fixed cost. a) Determine the profit maximizing price-quantity combination and the resulting profits. b) Calculate the Lerner Index for Apple's market power and estimate the elasticity of demand for iPads. c) Calculate consumer and producer surplus under market power. d) Suppose a $50 tariff (i.e., an import tax) is imposed all iPads when they enter the U.S. How will Apple's production decisions change? Did Apple gain or lose pricing power in response to the tax? e) Instead of a tariff, suppose the government set a price ceiling to maximize total surplus. Calculate the new price, quantity, profits, consumer surplus, and producer surplus. f) Calculate the deadweight loss due to the monopolistic market structure.
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