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Unformatted text preview: Micro 3101 Homework Assignment 4 Due on Monday 04/20/2009 Monopoly 1. Suppose that there is a single producer in the market, with the following total cost function TC ( Q ) = Q 2 2 + 10 Q + 20 The demand for the market is given by Q = 100- p (a) Calculate the marginal revenue (MR), marginal cost (MC) and the average cost (AC) (b) Assuming that this firm behaves competitively (i.e. with the price being set equal to marginal cost), find the equilibrium price, the quantity of the firm, and its profits. (c) Suppose that the firm act instead as a monopolist, find the equilib- rium output and price and calculate the firm’s profit 2. Consider the following inverse demand equation: p = a- bq and assume the total cost function is TC ( q ) = cq (a) Set up the monopolist’s problem as a profit maximization problem and calculate the profit maximizing output. (b) Suppose there is a profit tax τ levied on this monopolist, show that the profit maximizing output is still the same as in (a) (c) Suppose now there is a...
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This note was uploaded on 05/09/2010 for the course ECON 3102 taught by Professor Econ during the Spring '10 term at University of Minnesota Crookston.
- Spring '10