(a) (6 points) Suppose the cost function is given by T C (q) = F + cq where F; c > 0: At what
output level is the average cost minimized?
(6 points) Consider a monopoly market. Demand is given by Q(p) = 100
Mia
Ha
ECON
404
Summer
Quarter
2019
Honewort
1
.

TC
Cg
)
=
F
t
Cq
(
F
,
c
>
O
)
㱺
ACC
g)
=
Ff
t
c
.
If
we
want
to
minimize
the
average
eositgthen
:O
㱺
q
has
to
be
a
really
large
number
.
㱺
q
=
to
①
→
quantity
Qcp
)
=
100
p
㱺
p
=
IN

g
㱺
TR
=
100g
qd
㱺
MRCq
)
=
too
2g
MCC
g)
=
MR
(g)
㱺
10
=
100

Iq
㱺
g
=
45
㱺
p
=
too
45=55
maximizing
a
=
45
maximizing
I
=
55
DWL
=
Ig
x
45×45
=
1012
.
5
p
^
CS
=
¥45
x
45
=
1012
'S
too
,
yes
55
Hi
.
.
.
sa
:
:
:
:c
:&
:
:
:
:
:
:
:

ions
:
i÷
:
MR
l
D
=
Its
d
90
45
I
(c) (6 points) Consider a monopoly market. Demand is given by Q(p) = 100  p and the total
cost function of the monopolist is TC(q) = 10q+800: If the government imposes the average
cost pricing restriction, how much would the price and deadweight loss be?
Qlp
)=
100

p
㱺
p
=
100

g
TCC
g)
=
log
1800
㱺
ACG
)
=
lot
8,01
Mug
)
=
10
ACC
g)
=
100

q
⾨
to
+891=1009
⾨
8090+9

90=0
⾨
gd

90g
1800=0
㱺
{
9g
to
㱺
III.
'
0010=90
IN
80=20
p
n
Quantity
is
9=80
price
is
p
=
20
AC
DWL


Lx
10×10=50
§¥w
So
the
dead
weight
loss
is
50

i
i
80190
Q
10
Tel
get
g)
=
I
491
192
)
&
㱺
MC
(g)
=
91
19£
Formarketti
Qe
Cp
)
=
100

Lp
g
,
=
100

Ip
㱺
p
=
50

9£
TRE
p
.
q=
50g
,

O
.
599
㱺
Mrfq
)
=
50
9
,
Let
MR
,
Cgt
=
McCoy
't
⾨
50
91
=
91
192
⾨
50

2g
,
=
q
,
㱺
91=250.5927
From
the
calculation
in
market
I
㱺
92=201*921
㱺
q
,
=
25

0.5
(
IO

¥91
)
⾨
9
,
=
25

IO
t
¥9
,
⾨
91
=
15
+
Eg
91
⾨
¥91
=
15
㱺
q*_
Demand
Elasticity
for
market
:
Hp
(G)
=
.
If
㱺
1¥
=
JO

=
25
/
=

o
'
'
'
ET
,
㱺
PY
=

0.5
㱺
Inelastic
ble

LL

0.5
CO
For
.
Market
2
:
Q2
(
p
)
=
50

0.5
p
㱺
p
=
5%92
=
100

Iga
TRL
92
)
=
p.gg
=
10092

2922
㱺
MR
(g)
=
100

492
MRC
q
)
=
MC
Cgs
)
⾨
I
00

492
=
9
,
t
92
⾨
100

9
,
=
592
㱺
92=201*921
From
the
calculation
on
market
2
:
91=250.59292
=
20

¥
(
25
0.5g
)
⾨
92
=
20

5
+
Is
92
⾨
92
=
5
t
Es
92
㱺
¥92
=
5
㱺
gI=
Pat
=
100

29£
=
100

2x
=
2530
¥::i¥¥÷÷
=

I
㱺
It's
elastic
because

I
L

I
Fix
this
one
,
tcfq
)


91
tccqg
)

492
p=
10

q
Firmtthaxttecaf
)
=p
Castaway

Tccae
)
=
(
to

91

92791

91
Incar
)
297
=
10291

ga

t
⾨
O
=
g

29192
㱺
92=9291
㱺
92
=
9

2×4=1
㱺
192=17
e
Firms
:
Mae
takes
)=
play
19192

Tccqa
)
⾨
Iska
)
CIO
q

g)
Cgs
)

4qa
2£91
)
=
to

ga
.

Iga
4
292
⾨
0
=
6

q
,

Iqs
㱺
91=6

292
㱺
91=6

219

Ige
)
⾨
q
,
=
6

18
149
,
㱺
391=12
㱺
191=47

PL
q
)
=
100

q
,
TC
Cq
)
=
Iq
㱺
Mc
Cq
)
=
2
㱺
p
=
I
TR
(
q
)
=
100g

Iqd
㱺
MRL
g)
=
100
49
profit
It
=
TR
(
q
)

TC
(
q
)
=
100g

Ig
d

Iq
Icq
)
=
100
9
㱺
q
=
too

p
=
100

2
=
98
It
=
p
.
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 Spring '08
 Staff
 Supply And Demand