HW3Ans - Industrial Organization: EC460 Spring 2009...

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Industrial Organization: EC460 Spring 2009 Instructor: Thomas D. Jeitschko Assistant: Nakarin Amarase Homework 3 Instructions You must work in groups of at least two and no more than three students on this homework. Hand in one copy of your work per group. Please ask me if you seek clari±cation on any questions or the logistics of the homework and these instructions. Answer all questions. 1 Cournot Competition vs. Monopoly Consider a market with the following inverse demand: P = 135 6 Q 1. Suppose a monopoly with total cost function C = 3 2 Q 2 supplies this market. Find the pro±t maximizing levels of price and quantity for the monopoly, and then calculate pro±t and consumer surplus associated with those price and quantity levels. Answer 1
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MC = d dQ 3 2 Q 2 ± = 3 Q MR = d dQ 135 Q 6 Q 2 ± = 135 12 Q MR = MC 135 12 Q = 3 Q 15 Q = 135 Q m = 9 P m = 135 6 Q m = 135 6(9) = 81 m = P m Q m 3 2 ( Q m ) 2 = (81)(9) 3 2 (9) 2 = 607 : 5 CS m = 1
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This note was uploaded on 03/29/2009 for the course ECON 460 taught by Professor Boyer during the Spring '08 term at Michigan State University.

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HW3Ans - Industrial Organization: EC460 Spring 2009...

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