Question 1. Suppose that a monopoly firm supplies to two different markets with the demand functions: Market 1: q1 = 100 – 2p1 + P2 (1.1) Market 2: q2 = 150 + P1 – 3p2 (1.2) (a) Derive the inverse demand functions for both markets, and explain the relationship between the demand for the two goods. Assume that the firm's cost function is (q, + q2)² .

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.6P
icon
Related questions
Question
I need the full answers of all parts correct and fast please
Question 1.
Suppose that a monopoly firm supplies to two different markets with the demand
functions:
Market 1: q, = 100 – 2p1 +P2
(1.1)
Market 2: q2 = 150 + p1 – 3p2
(1.2)
(a) Derive the inverse demand functions for both markets, and explain the
relationship between the demand for the two goods.
Assume that the firm's cost function is (q1 + 92)².
(b) Derive the profit-maximizing outputs, prices and the maximum profit. Show that it
is true maximum.
(c) Suppose there is a restriction of q2 < 20 in the market for good 2. What is the
impact on the firm's output in both the markets, as well as on the maximum
profit?
Now suppose the firm has a resource constraint such that it can produce a maximum of
40 units of both goods in total, i.e., q, + q2 5 40.
(d) What is the impact on the firm's output in both markets, as well as on the
maximum profit? Compare this result with those in parts (b) and (c) above.
Transcribed Image Text:Question 1. Suppose that a monopoly firm supplies to two different markets with the demand functions: Market 1: q, = 100 – 2p1 +P2 (1.1) Market 2: q2 = 150 + p1 – 3p2 (1.2) (a) Derive the inverse demand functions for both markets, and explain the relationship between the demand for the two goods. Assume that the firm's cost function is (q1 + 92)². (b) Derive the profit-maximizing outputs, prices and the maximum profit. Show that it is true maximum. (c) Suppose there is a restriction of q2 < 20 in the market for good 2. What is the impact on the firm's output in both the markets, as well as on the maximum profit? Now suppose the firm has a resource constraint such that it can produce a maximum of 40 units of both goods in total, i.e., q, + q2 5 40. (d) What is the impact on the firm's output in both markets, as well as on the maximum profit? Compare this result with those in parts (b) and (c) above.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Receipt
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Microeconomic Theory
Microeconomic Theory
Economics
ISBN:
9781337517942
Author:
NICHOLSON
Publisher:
Cengage
Managerial Economics: Applications, Strategies an…
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning