01282009160625vYV0OL9UQ7

01282009160625vYV0OL9UQ7 - Homework VI(NEW corrected as of...

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1 Homework VI (NEW! – corrected as of 7PM, 11/20/08) Principles of Microeconomics 1101 Lecture 017 Fall Semester – 2008 Mike Walrath Due 12/01/08 Note: Homework must be turned in at the end of lecture on Monday, 12/01/08 (see syllabus for late homework policy). Your homework must be in chronological order. Answer questions in order and please put all tables and graphs in the same area as your answer . Type everything but graphs and calculations for full credit. Label all graphs for full credit. Show all work. Bonus Question (5 points) Write your TA’s name and section number on the top right of the first page of your homework. Question 1 (8 points) Graphically represent a monopolist that can utilize perfect price discrimination. Show the quantity produced, profits, and dead weight loss. Question 2 (23 points) Consider the market for scooters. Suppose it is a (single-price) monopolistic market. The market demand for scooters is given by the equation Q Q P D = 200 ) ( . The firm faces costs given by the total cost function 10 50 2 ) ( 2 + + = Q Q Q TC and marginal cost function 50 4 ) ( + = Q Q MC . (a) What will be this firm’s profit maximizing quantity? (b) What profit does this firm earn? (c) Calculate the deadweight loss generated by this monopoly. Now suppose this monopolist is a perfect price discriminator. (d) What will be this firm’s profit maximizing quantity? (e) What profit does this firm earn?

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