1. Assume a total cost function c(q) = 750 + 5q. The inverse demand function that the firm %3! faces is p =285 - 4q, where prices and costs are measured in dollars. a. Let assume that the firm is required by law to set its production level q determined by price equal to its marginal costs. In another word, the firm is a perfect competitor. How much profit the firm will lose? b. Assume now that the firm can charge a monopoly price, what is the price going to be and what is the profits? Compare the profit level from question a and b and explain what cause the difference.

1. Assume a total cost function c(q) = 750 + 5q. The inverse demand function that the firm %3! faces is p =285 - 4q, where prices and costs are measured in dollars. a. Let assume that the firm is required by law to set its production level q determined by price equal to its marginal costs. In another word, the firm is a perfect competitor. How much profit the firm will lose? b. Assume now that the firm can charge a monopoly price, what is the price going to be and what is the profits? Compare the profit level from question a and b and explain what cause the difference.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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