"Monopoly Monopsony In Class0-1

"Monopoly Monopsony In Class0-1 - Monopoly and...

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Monopoly and Monopsony In Class Exercises 1. Acme, Inc has a monopoly in its market. The company faces demand of Q = 400–20P. The company’s costs of production are C(Q) = 200+5Q+Q 2 /40 (Here dC(Q)/dQ = 5 + Q/20). Acme can only sell integral units of output. a) How many units of output will Acme produce to maximize profits? b) What price will this firm charge for its product? c) Illustrate your answer in the graph below: d) What profit will Acme earn? e) What is the deadweight loss in efficiency caused by this monopoly? f) If this firm could practice perfect, or 1 st degree, price discrimination – charging each customer the maximum he/she is willing to pay for the good, how many units of output will produce? What will its profit be? What is the deadweight loss in efficiency? 2. Ajax operates in a perfectly competitive market for its output, confronting a market price P = $5.00 per unit. The company faces fixed costs of $150. It is the only employer of labor in its input market. Labor supplied at different wages and total production by labor are given in the table below:
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This note was uploaded on 04/12/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue.

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"Monopoly Monopsony In Class0-1 - Monopoly and...

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