Section -a q1

Evaluating power implies to an organization's capacity to raise cost of its product without significant opposition. Apple can impact the cost of a decent and can make a positive monetary benefit. At the point when the iPhone was at first presented by Apple, the organization had solid valuing power since it was basically the main organization offering a revolutionary device offering functionalities of a mobile and laptop/desktop on one single device. At that point, along with the iPhones being costly, there was also no competing gadget, so its market was expanding year by year until 2015. Indeed, even as the main rival cell phones rose, the iPhone actually involved the high finish of the market regarding evaluating and anticipated quality. Even though its market share did decline but that did not led it to completely evaporate from the market. On the contrary, it gave Apple an opportunity to expand and focus on other emerging markets with better products and accessories.

The majority of the Indian potential customers were from average middle class and also highly price sensitive. Thus, placing iPhone in the higher price range may reduce the sale of iPhones. Given the presence of brands like Samsung, Nokia, OPPO, Vivo etc offering premium features at much lower prices, it is advised to not go with the higher price range for the products. The competition from the local Indian as well as Chinese brands is also high. Moreover, the barriers to entry to the Indian smartphone market is low which further increases the competition in the Indian Market. Also, replacement tendency in India is much higher than other countries and as a result people don’t really go for smartphones in the ultra-premium range.

A large portion of the cell phone sold in India are in the value scope of $50 to $200 while the plan of Apple is to launch somewhere in the range of over $900 which may not be taken well by the potential customers. Also the premium smartphone market, where Apple works is actually less than 5% of the overall smartphone market of India. The cost cognizant consumers of India has not acknowledged the premium that Apple charges for its products.

Section – B

Q7. Is there any one-to-one correspondence between price and quantity supplied under monopoly? Hence, draw the supply curve of a firm operating under monopoly. Discuss in detail.

Answer:-

Since under Monopoly, the output decision of a monopolist not only depends on marginal cost but also depends on the shape of the demand curve, there is no such one-to-one correspondence between price and quantity supplied.

1. 
   A given quantity is sold at two different prices
   

Monopolist sell Quantity Q at two different prices P1 and P2 depending on the price elasticity of demand. AR1 and MR1 are the initial average and marginal revenue curves of the monopolist. If the demand curve is AR2 then the corresponding marginal revenue curve becomes MR2. Marginal cost curve MC cuts MR1 and MR2. If the demand of the product is less elastic, same quantity will be offered for sale at two different prices. Thus showing no unique relationship between price and quantity.

2. 
   At a given price two different quantities are sold
   

Two different products Q1 and Q2 are sold at same price depending on the elasticity of demand for the monopoly product. In this graph, MC curve cuts MR1 and MR2 at points E1 and E2 corresponding to the demand curves AR1and AR2, respectively. Thus two different quantities can be sold at the same price, given the marginal cost of the monopolist firm. Hence no unique relation between price and quantity.

1. 
   Is this monopolist operating in the short run or the long run? Also, given the monopolist engages in uniform pricing, calculate the monopolist's profit-maximizing price and quantity sold. What is the level of profits in this scenario?
   

Given,

P(Q)= 100/5 – Q/5

Total revenue = P(Q)*Q = 20Q-(Q^2)/5

Marginal Revenue = 20 – 2Q/5

MR/dQ = -0.4 – slope of MR curve

Marginal Cost = Q

MC/dQ = 1 – slope of MR curve

As the slope of MC curve is greater than slope of MR curve. Therefore, the monopolist is operating in short run.

For uniform pricing P1=P2

Q(P) = Q1(P)+ Q2(P) = 100-5P

P(Q)= 100/5 – Q/5

For profit maximization => MR=MC

Profit = Total revenue – Total Cost = P(Q)*Q- C(Q)

= (100/5 – Q/5) *Q – (2+Q^2/2)

Differentiating the above equation and equating it to zero we get

Q = 100/7

P = 120/7

Profit = (120/7) *(100/7) – 2- (100/7) ^2/2 = 140.86

2. 
   The monopolist can now engage in third-degree price discrimination, setting a different price for each market segment. Calculate the monopolist's optimal prices charged to each market segment, the quantities consumed by each market segment, the price elasticity in each market segment, and the monopolist's profits. Would the monopolist rather engage in this price discrimination or would they rather set a uniform price?
   

P1(Q) = 20 -Q1/3

P2(Q) = 20 – Q2/2

TR1 = P1(Q)*Q = (20-Q1/3) *Q1

TR2 = P2(Q)*Q = (20-Q2/2) *Q2

MR1 = 20 – 2Q1/3

MR2 = 20-Q2

MR1 = Q1

Q1 = 12

MR2 = Q2

P1 = 16

Total Profit = P1Q1 + P2Q2 – C(Q)