Quiz 10 - Since TC = 20Q, MC = 20. Also, from the demand...

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Econ 302 Quiz 10 McLeod Name ________________________________ ID # _________________________________ 1. Suppose a monopolist has a production function given by Q = L 1/2 K 1/2 . Therefore, MP L = 2 / 1 2 / 1 2 L K , and MP K = 2 / 1 2 / 1 2 K L The monopolist can purchase labor, L at a price w = 25, and capital, K at a price of r = 4. The demand curve facing the monopolist is P = 100 – 4Q. a) What is the monopolist’s total cost function? TC = 20Q b) How much output should the monopolist produce in order to maximize profit?
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Unformatted text preview: Since TC = 20Q, MC = 20. Also, from the demand curve, MR = 100 8Q. Setting MC = MR and solving, we get Q M = 10 c) How much labor should the monopolist hire? L* = 2/5Q, so L* = 4 d) What price should the monopolist charge? If Q = 10, then substituting into the demand curve, P M = 60 e) What is the deadweight loss? DWL = 200...
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Quiz 10 - Since TC = 20Q, MC = 20. Also, from the demand...

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