Homework 6

# Homework 6 - ECON 1100 Intermediate Microeconomics...

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ECON 1100: Intermediate Microeconomics Instructor: Sandra Orozco Homework 6 Due date: November 10, 2010 1. (20 points) Market demand is P = 64 - (Q/ 7). A multi-plant monopolist operates three plants, with marginal cost functions: MC1(Q1) = 4Q1 MC2( Q2) = 2 + 2Q2 MC3( Q3) = 6 + Q3 a) Find the monopolist’s profit- maximizing price and output at each plant. b) How would your answer to part (a) change if MC2(Q2) = 4? 2. (20 points) Suppose that you are hired as a consultant to a firm producing a therapeutic drug protected by a patent that gives a firm a monopoly in two markets. The drug can be transported between the two markets at no cost, so the firm must charge the same price in both markets. The demand schedule in the first market is P1 = 200 - 2Q1, where P1 is the price of the product and Q1 is the amount sold in the market. In the second market, the demand is P2 = 140 - Q2, where P2 is the price and Q2 the quantity. The firm’s overall marginal cost is MC = 20 + Q1 + Q2. What price should the firm charge?

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Homework 6 - ECON 1100 Intermediate Microeconomics...

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