ProblemSet10_2009 - Econ 6202, Fall 2009 Dmitry Shapiro...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Econ 6202, Fall 2009 Dmitry Shapiro Problem Set 10 Optional 1. A monopolist faces a market demand curve given by q ( p ) = 70- p. (a) If the monopolist can produce at constant average and marginal costs of AC = MC = 6, what output level will the monopolist choose to maximize profits? What is the price at this output level? What are the monopolists profits? (b) Assume instead that the monopolist has a cost structure where the total costs are described by TC ( q ) = 1 4 q 2- 5 q + 300 . Find the price-quantity combination that maximize the monopolists profit. What will profits be? 2. First-degree price discrimination Consider the following economy. There are two consumers, 1 and 2, who derive utility from a certain good ( x ) and from money ( m ). The consumers utility functions are u 1 ( x,m ) = 40 x + m, u 2 ( x,m ) = 60 x + m. A monopolist produces the good at constant average and marginal costs c = 5. Suppose that the monopolist observes the consumers utility and makes take-it-or-leave-it offers (...
View Full Document

This note was uploaded on 10/20/2010 for the course ECON 6202 taught by Professor Shapiro during the Fall '09 term at UNC Charlotte.

Ask a homework question - tutors are online