econ100_winter2010_ps8

econ100_winter2010_ps8 - Problem Set 8 Economics 100 Winter...

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Problem Set 8 Economics 100 Winter 2010 Due March 9, 2010, 9 am 1. Using the relationship between marginal revenue and the price elasticity of demand, explain why a monopolist will never produce where the price elasticity of demand is between 0 and -1. 2. A monopolist is deciding how to allocate output between two markets. The two markets are separated geographically. Demand in each market is given by: P 1 = 15 – Qd 1 P 2 = 25 – 2Qd 2 The total cost function is TC = 5 + 3Q (Q 1 is output sold in region 1, and Q 2 is output sold in region 2. Total output is Q = Q 1 + Q 2 ) Find the price charged, total output level, and profits, if the monopolist can price discriminate. 3. Customers attending sporting events at a local arena must pay for parking and pay for a ticket to enter the event. All customers have identical demand curves, and their total demand can be expressed as: P = 25 - .000625Qd. The marginal cost of providing the event is $10 per seat.
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econ100_winter2010_ps8 - Problem Set 8 Economics 100 Winter...

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