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Chapters 10 and 11 (INDIVIDUAL Submissions) Due: 9/4 6pm Sharp (EEE DropBox or mailbox in SSPA 3 rd floor mailroom) 1. A monopolist faces demand given by P=18-0.5Q (MR=18-Q) and produces with a constant marginal cost of \$10. Assume that there are no fixed costs. i. Solve for the profit-maximizing quantity and price. What is the firm’s profit? ii. If this was a competitive market, what would the equilibrium price and quantity be? iii. Graph D, MR, and MC curves for the monopolist. Show the area that represents the social gain if the monopolist was forced to produce and price at the competitive equilibrium. Who would gain and lose as a result?
2. A profit-maximizing monopolist is producing 800 units of output and is charging \$40 per unit. i. Assume that the product’s price elasticity of demand is -2. What is the MC of the last unit produced? ii. What is the firm’s percentage markup of P over MC? 3. A monopolist can produce its new patented drug in one of two plants, with costs of production of MC 1 =20+2Q 1 or MC 2 =10+5Q 2 .   The firm estimates demand to be P=20-3Q, where Q= Q 1 +Q 2 . How much should the profit-maximizing firm produce in each plant? How much would it charge for the product? (Hint: graphing MC 1, MC 2, and demand on a single graph may help)
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Chapters 10 and 11 (INDIVIDUAL Submissions)
Due: 9/4 6pm Sharp (EEE DropBox or mailbox in SSPA 3rd floor mailroom)
1. A monopolist faces demand given by P=18-0.5Q (MR=18-Q) and produces with a...

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