Econ 204_hw8 - ECON 204 STUDY QUESTIONS 8 Monopoly 1)...

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Unformatted text preview: ECON 204 STUDY QUESTIONS 8 Monopoly 1) Consider a monopolist whose cost function is: c (y) = 2y, where y is the amount of output produced by the monopolist. The monopolist faces a market demand curve described by equation g G (p) = 11−p/2, where g G is the quantity demanded when the price of a unit of output is equal to p. The monopolist’s goal is to maximize its profits. (a) Calculate the monopolist’s optimal level of output. What price does the monopolist charge for its output? (b) Calculate consumers’ surplus given the monopolist’s optimal choices for price and output. In addition, compute producer’s surplus (i.e. the monopolist’s profits). What is the total amount of surplus generated by this market? 2) The US pharmaceutical company Pharmacia holds a patent on drug P in the US and an analogous patent in Canada. Its marketing department has identified the following inverse demand curves for drug P by US and Canadian consumers: ¡ ¢£ = 1,000− ¤ ¢£ ¡ ¥¦ = 500−...
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This note was uploaded on 01/06/2010 for the course ECONOMICS econ204 taught by Professor Izakatiyas during the Spring '09 term at Sabancı University.

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