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Unformatted text preview: Economics 11, Winter 2011: HW #1 Due Tuesday Jan 18 at the beginning of class In class, we worked out a comparison between the competitive solution and the monopoly solution in a setting with many consumers and one firm. Prob lems 1 and 2 ask you to do the same thing for different cost functions. In both Problems 1 and 2, assume market demand is Q = 1 P . 1. The cost function for the single firm is C ( Q ) = (1 / 2) Q + Q 2 (a) Find the supply function, assuming that the firm behaves as if it were competitive. That is, given a price P , find the profit maximizing quantity Q . Caution: for some values of P , the profitmaximizing quantity Q = 0 (it will be optimal for the firm not to produce). (b) Use the supply function you computed above to find the compet itive equilibrium quantity and price. (c) Find the monopoly quantity and price. (d) Compare the competitive solution and the monopoly solution with respect to price, quantity, consumer welfare, firm profit....
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This note was uploaded on 10/23/2011 for the course ECON 101 taught by Professor Buddin during the Winter '08 term at UCLA.
 Winter '08
 Buddin
 Monopoly

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