"Monopoly Monopsony In Class0-1

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

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
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.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern