Econ_102A_PS6 - iii) How much profit does each firm make?...

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Econ 102A Problem Set 6 1. Suppose that the market demand curve is given by Q=100-P. Also, the firms’ technology is given by Q=f(K,L)=KL ½ . The rental rate on capital is $10/unit and the wage is $25. The firm utilizes 5 units of capital in the short run. The market structure is perfectly competitive. i) Write down the total cost function and total variable cost function. What are the fixed costs? ii) Derive the marginal cost function. If the price prevailing in the market is $50, how many units will the firm sell? How many firms are in the industry?
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Unformatted text preview: iii) How much profit does each firm make? iv) What is the value of the consumer and producer surpluses in this equilibrium? 2. Now suppose that the rest of the producers leave the market so that only one is left to monopolize the market. The market demand curve is the same as in #1. i) What is the marginal revenue function? ii) What how many units will the monopoly sell? What price will they charge? iii) How much profit will the monopoly make? What is the new consumer surplus? iv) What is the deadweight loss due to monopolization?...
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This note was uploaded on 02/03/2010 for the course ECON econ102a taught by Professor Bandy during the Winter '09 term at UC Riverside.

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Econ_102A_PS6 - iii) How much profit does each firm make?...

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