🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Economics
6
answers
0
watching
28
views

Suppose a monopoly has a cost function C(q) = q+q^2+1 and faces a market demand p = 10-1.5q: Also, MC(q) = 2q, MR(q) = 10-3q:

a) Find profit maximizing level of output and price. Show your work.

b) calculate total revenue, total cost and profits under profit maximizing level of output.

c) suppose government sets a price ceiling for the monopolist, in order to maximize social welfare. Find such price ceiling. Show your work.

Watch
6
answers
0
watching
28
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

A firm with market power faces the demand function q=4000-40p. The firm's total cost function is TC(q)=10q+.001q^2+1000.

a. If the firm behaves as a single price monopoly, identify the firm's optional price and output level.

b. Demonstrate that the single price monopolist's profit maximizing choice of price and output also maximizes producer surpulus.

c. Identify the output level that would maximize total surplus.

d. Identify the output level that a perfect price discriminating monopolist would produce.

PROFIT MAXIMIZATION

Reminders:

Q: Quantity, TC: Total Costs, VC: Variable Costs, MC: Marginal Costs, MR: Marginal Revenue, TR: Total Revenue

1. Suppose the market for DVD movies is perfectly competitive. The industry price for the movies is $24, and a typical firm has the following total cost data:

Q

TC

VC

MC

MR

TR

Net Profit

0

10

1

33

2

53

3

70

4

90

5

114

6

143

a. Calculate the TR, MR, and MC for each level of output.

b. What condition must be met for the firm to maximize profits? What is the profit maximizing level of output and price for this firm? How much profit would be made?

2. Now suppose that some firms have been able to differentiate their DVDs, and the market has become monopolistically competitive. A typical firm now has the following demand schedule and total cost data:

Q

P

TC

VC

MC

MR

TR

Net Profit

0

40

8

1

35

20

2

30

28

3

25

40

4

20

56

5

15

76

6

10

100

a. Calculate the TR, MR, and MC for each level of output.

b. What condition must be met for the firm to maximize profits? What is the profit maximizing level of output and price for this firm? How much profit would be made?

Harry Smith owns a metal-producing company that is an unregulated monopoly. After considerable experimentation and research, total cost and marginal cost curves are: TC = 100 + 60Q + Q2 MC = 60 + 2Q where MC is marginal cost (in dollars) and Q is output. The demand and marginal revenue curves for the product are P = 100 Q MR = 100 2Q where P is the product price (in dollars) and Q is output.

a. If Smith wants to maximize profit, what output should he choose?

b. What price should he charge and what are his profits?

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in