{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ProblemSet10_2009

ProblemSet10_2009 - Econ 6202 Fall 2009 Dmitry Shapiro...

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

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 monopolist’s 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 monopolist’s 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 ( r i , x i )), i = 1 , 2 ( r i
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online