2009Problem_Set_3 - AEM 4150 Price Analysis Fall Semester...

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AEM 4150 Price Analysis Fall Semester 2009 Homework Assignment 3 This assignment is due at the beginning of class on Tuesday, September 22, 2009. 1. A firm faces the following inverse demand curve: P = 300 – 0.2Q Which has the corresponding marginal revenue function: MR = 300 – 0.4Q Where: Q is the monthly production P is price, measured in dollars per unit The firm also has a total cost (TC) function of: TC = 4,000 + 20Q Assuming the firm maximizes profits, answer the following: a) Assuming the firm operates as a monopolist, calculate the following: price, quantity, and profit. Graph and show the equilibrium price and quantity. (2 points) b) Assuming perfect competition, what are price, quantity and profit? Show the equilibrium price and quantity on the graph from above. (2 points) 2. You have been assigned the task of helping the Robinson Marketing, Inc., the sole marketing agency for milk produced in the Caribbean Island. In the past the producers have been marketing their milk as a homogeneous commodity to all processors of milk. However, you have studied the market extensively and realize that the market can actually be segmented into two separate units: (1) the market for fluid milk (milk for drinking) and (2) the market for processing milk (for manufacture of cheese, etc.). In fact, you have done some preliminary
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2009Problem_Set_3 - AEM 4150 Price Analysis Fall Semester...

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