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# Econ 101 Problem Set 1 Due Monday Jan. 16 in class 56 pts total. 6 pts extra credit. 1. (12 pts) A monopolist faces a market demand curve given by: Q...

I am having trouble with this problem set for my Intermediate economics course. Could I get an in depth explanation as to how to solve these questions? Thank you in advance.
Econ 101 Problem Set 1 Due Monday Jan. 16 in class 56 pts total. 6 pts extra credit. 1. (12 pts) A monopolist faces a market demand curve given by: Q = 240 - P and a cost function of C ( Q ) = 10 + 40 Q + Q 2 (a) (4 pts) Find the proﬁt maximizing quantity and price. Calculate the monopoly’s proﬁts and consumer surplus. (b) (5 pts) What price and output level would have been produced by this industry under perfect competition ( P = MC )? Calculate consumer surplus and ﬁrm proﬁts at the competitive output level. Calculate the deadweight loss due to monopoly. (c) (2 pts) Suppose the government wanted use a per-unit subsidy of \$ S to incentivize the monopolist at the competitive output level. What is the value of \$ S and how much would the total subsidy cost? (d) (1 pt) Would you recommend for or against using the subsidy as an incentive to produce at the competitive level? 2. (8 pts - 2 each) Label the following practices as ﬁrst, second or third degree price discrimination (or not price discrimination) (a) An airline charges fees for customers who check in bags 1
(b) A fast food restaurant lets you double the size of your drink for only 20 cents more (c) A college charges lower tuition to an economically disadvantaged student (d) A grocery store mails out coupon ﬂiers 3. (14 pts) Oceanic Airlines is the sole provider of ﬂights to and from Dharma Island. They face two types of customers: business travelers and leisure travelers. The demand by business travelers is: Q B = 100 - P B and the demand by leisure travelers is: Q L = 400 - 4 P L The cost function is: C ( Q ) = 1 10 Q 2 + 10 Q + 50 (a) (5 pts) Suppose that Oceanic cannot distinguish between the two types of travel- ers. Calculate the proﬁt maximizing price and quantity. Calculate proﬁt and the consumer surplus for each type of traveler. (b) (2 pts) Oceanic wants to distinguish between business and leisure travelers by charging more for customers who show up at the airport wearing a suit and carrying a laptop bag or briefcase. What might go wrong with this plan? Propose an alternative strategy for Oceanic to distinguish between business and leisure travelers. (c) (7 pts) Suppose now that Oceanic can distinguish between the two types of trav- elers and that they can prevent resale of tickets. Calculate the proﬁt maximizing prices and quantities for each type of traveler. Calculate proﬁt and consumer surplus for each type of traveler. 4. (12 pts) You provide homework solving services to your two “friends”, Alice and Bob. Their demand for homework solutions are: P A = 100 - 2 Q A and P B = 100 - Q B 2
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HI Please find revise solution attached. For Q2 I dont see any... View the full answer

Q1 a. equate MR to MC TR= P*Q = 240Q -Q^2 MR= 240-2Q MC= 40+2Q 240 -2Q =40 +2Q Q= 50 and P= 240-50 =190 TR=190*50= 9500 TC= 10 +40*50 +50*50 = 4510 Profits= 4990 CS= *(240-190) *50 = 1250 b. equate...

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