GEB3373+Exam+1+Math+Review

# GEB3373+Exam+1+Math+Review - 1 Suppose that Barilla has a...

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Unformatted text preview: 1. Suppose that Barilla has a monopoly on store bought pasta. It faces a straight line demand curve with a vertical intercept of \$100 and a horizontal intercept of 1,000,000 units. The constant marginal cost is \$25. Barilla’s profit is… Answer: Slope = - 100/1,000,000 = - .0001 P= 100 - .0001Q Q = -10,000P + 1,000,000 π = (P-MC)Q π = (P-25) (-10,000P+1,000,000) π = -10,000P 2 + 250,000P + 1,000,000P – 25,000,000 π = -20,000P + 1,250,000 Set π= 0 and solve for P 0 = -20,000P + 1,250,000 20,000P = 1,250,000 P = \$62.50 To figure out profit plug P into your original profit equation π = (62.50-25)(-10,000(62.50) + 1,000,000) π = (37.50)(375,000) = \$14,062,500 2. Suppose Audi has a monopoly on the automobile industry. It faces a straight line demand curve with a vertical intercept of \$80,000 and a horizontal intercept of 200,000 units. The constant marginal cost is \$20,000. The deadweight loss from monopoly is… Answer: Slope = - 80,000/200,000 = - 0.4 P = 80,000 - .4Q Q = 200,000 – 2.5P π = (P-MC)Q π = (P-20,000)(200,000-2.5P)π = (P-20,000)(200,000-2....
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GEB3373+Exam+1+Math+Review - 1 Suppose that Barilla has a...

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