Q1. A firm faces the following demand and total cost functions:
P = 50 0.5Q
TC = 0.25 Q2 + 35Q + 25
Show that the Q, which minimizes Average Cost, also maximizes profits.
Q2. A firm faces the following demand and total cost functions:
Q = 28
Oligopoly 1 Tutorial Solutions
1. In a Bertrand model, what will be the equilibrium price if:
a) Firm 1 has a MC of 10 and firm 2 has a MC of 10.
In a Bertrand duopoly firms will cut their price up to their marginal cost, therefore both firm will charge
Monopoly Tutorial Questions
1. Determine the profit maximizing output and price of a monopoly if market demand is given by
P=6000-10Q and total cost is C=500+5Q^2.
TR = P*Q
TR = 6000Q 10Q2
MR = 6000 20Q
MC = 10Q
MR = MC
10Q = 6000 20Q
Q = 200
P = 4000
Pricing Tutorial Solutions
Q1. Assuming you have the highest estimate, how would you avoid the winners curse in a
common-value, first price, sealed-bid auction?
The winners curse occurs when the highest bidderhaving won because of excessive optimism
BUS 207 Demand Analysis Tutorial
Point Elasticity measure the elasticity of demand at a particular point on the D curve
When Ep = 0 we have a perfectly inelastic demand meaning the D curve is vertical and for any %
change in Pr