Consider a single pricing monopolist with a demand equation P = 60 - 2Q. It encounters a constant
marginal cost of $20 which is also equals to the average total cost.
(a) Identify the optimal price and quantity for the monopolist. Illustrate yo
(ii) An improvement in the technology of air travel has occurred which affects both classes equally.
Draw a suitable diagram to illustrate and discuss the effect on the equilibrium price and quantity of
business class and economy class tickets. From the d
(a) Consider the market for air travel. It is discovered that the demand for business class ticket is
relatively more inelastic compared to the demand for economy class ticket.
(i) Assume that initially the equilibrium price and quantity of tickets for bo
Answer each question by putting the letter of the correct answer in the blank. Be sure I can read your answer.
Name: _ Date: _
_ 1. The entire group of demanders and suppliers of a particular good or service makes up
Midterm Exam I
There are 50 questions. Mark your answer to each question on the answer sheet.
1.The opportunity cost of an activity is the value of
A)an alternative forgone.
B)the next-best alternative forgone.
C)the least-best alternative forgone.
Monopoly Profit Maximization
A Model of Monopoly
How much should the monopolistic
firm choose to produce if it wants
to maximize profit?
The Monopolists Price and
The first thing to remember is that
marginal revenue is the
In a fishing village famous for its cuttlefish, there are many firms producing dried cuttlefish. The
cuttlefish are identical and each firm has only a small market share with no control over the price.
Hence the dried cuttlefish market can be considered a
the total cost
incurred by a
firm in the
(i) Describe the relationship between total cost and average cost. Calculate
(a) An airline offering flight services
from Singapore to Bangkok, Thailand,
has two classes of seats, business
class and economy class. Due to the
higher oil prices, the airline has
increased the ticket prices for both
classes. The prices and
Week 6 - Monopoly
November 26, 2007
Suppose that a monopolist is faced by a linear demand curve XD = A bPX
and has a constant marginal cost of C.
(a) To find the monopolists profit-maximizing price and output, we first
form the profit function = XD Px C
C H A P T E R
Analyzing and Recording
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