ps9s08sol - Economics 101 Spring 2008 Problem Set 9...

This preview shows pages 1–3. Sign up to view the full content.

Economics 101 – Spring 2008 Problem Set 9 Suggested Solutions 1. Question 5, page 378 a. With any two points in the table, it is possible to get the demand curve equation: P = 18 - ½ Q. Since demand is linear, the MR curve is a straight line with the same intercept but twice the slope. => MR = 18 - Q b. The profit maximizing output is such that MR = MC => Q=8 , P=14 With a constant MC of \$10, the total cost of the firm is given by C(Q) = 10Q + FC. => Profit = 14*8 – (10*8 + FC) = 32-FC . c. In perfect competition P=MC => P=10, Q=16. d. Consumers will gain area B+C, while the producers will lose area B. So, the social gain is equal to area C. => Social gain=(½)(16-8)(14-10)=16. 2. Question 6, page 379 C=100+2Q 2 MC=4Q P=90-2Q MR=90-4Q a. A monopolist will choose Q m such that MR=MC => Q m =11.25 , P m =67.50 , Π m =406.25 b. In a competitive environment Q is such that MC=P => Q c =15 , P c =60 , Π c =350 P 18 8 16 36 MR MC Q 10 14 C A B

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
c. 3. Question 8, page 379
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 4

ps9s08sol - Economics 101 Spring 2008 Problem Set 9...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online