Econ100C-Summer2011-Midterm-sols

Econ100C-Summer2011-Midterm-sols - Economics 100C:...

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Economics 100C: Microeconomics C Midterm Solutions: Summer I 2011 1. (24 pts) A monopolist has the short run cost function of   2 10 CQ aQ Q  where a > 0. Inverse market demand is   80 D PQ Q . a. Assuming no shut-down, find the monopolist’s profit maximizing price and quantity. (Each may be a function of a .)    2 max 80 10 FOC: 80 2 2 0 80 4 80 240 80 44 Q M M QQ Qa Q Q a Q aa P    b. For what values of a will the firm choose not to shut down? Show your work using an appropriate no shut-down condition. 80 80 3 Don't shut down if: 240 80 3 80 M AVC Q a Q AVC P AVC a      c. Suppose the government imposes a price ceiling of 40. Find the monopolist’s profit maximizing price and quantity if it doesn’t shut down. (Your answer may be a function of a .) For what values of a will the firm choose not to shut down? Show your work using an appropriate no shut- down condition.
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 2 max 40 10 FOC: 40 2 0 40 2 40 40 40 22 Don't shut down if: 40 40 2 40 Q MC MC MC Qa Q Q aQ Q a Q P aa AVC a P AVC a      
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This note was uploaded on 01/20/2012 for the course ECON 100c taught by Professor Staff during the Spring '08 term at UCSD.

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Econ100C-Summer2011-Midterm-sols - Economics 100C:...

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