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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) = 32FC
.
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)(168)(1410)=16.
2. Question 6, page 379
C=100+2Q
2
MC=4Q
P=902Q
MR=904Q
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
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3. Question 8, page 379
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 Spring '07
 Hansen
 Economics, Microeconomics

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