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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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A monopolist faces a demand curve given by Q = 70-P. The monopolistis marginal revenue function is given by M R = 70 -2Q.
a. If the monopolist can produce at constant average and marginal costs of AC = MC = 6, what output level will the monopolist choose in order to maximize profits? What is the
b. Assume instead that the monopolist has a cost structure where total costs are described by T C = .25Q^2- 5Q + 300 and marginal cost is given by M C = .5Q- 5. With monopolist facing the same market demand and marginal revenue, what price-quantity combination will be chosen now to maximize proÖts? What will proÖts be?
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- Pls solve sub questions 1, 2 and 3 onlyarrow_forwardConsider an incumbent/monopolist with the following demand and marginal cost: P=300–Q; MC=$50. a. What is the profit maximizing price and output for the monopolist? What is the monopolist’s profit? b. Suppose there is a potential entrant, but the entrant has a cost disadvantage. The entrant’s MC = $75. Solve for the residual demand curve for the potential entrant (the entrant assumes that the monopolist will not change their total quantity from part a). c. What is the entrant’s output, price, and profit? What is the monopolist’s profit? d. What is the limit price that the monopolist could charge to deter entry? e. Is the threat/promise of the monopolist to charge the limit price a credible threat, or is the monopolist better off accommodating entry? Explain briefly.arrow_forwardSuppose a monopolist faces a market demand that is the first two columns in the table below. Also, in the short run, assume that Total Fixed Cost equals $100 and the monopolist has Total Variable Cost according to the table. Find Total Revenue for each price and quantity combination, and then Marginal Revenue as price falls and quantity increases. Fill in the rest of the costs in the table and find profit at each price and quantity combination as the difference between Total Revenue and Total Cost. If profit is less than zero that indicates a loss. What is the maximum profit you found in this table? At what quantity and price combination is profit maximized for this monopolist? Next, verify this result by using Marginal Analysis to find the profit maximizing price and quantity combination. For each quantity, ask yourself if Marginal Revenue exceeds Marginal Cost. If it does, then profits would be increased by producing that quantity. As you go down the table to higher quantities, stop…arrow_forward
- This is part 1 of a multi-part question. A monopolist faces the demand curve Q = 144 / P2, where Q is the quantity demanded and P is price. Its average variable cost is AVC = Q1/2 and its fixed cost is 25. 1. Find the monopolist's profit-maximizing quantity. (Round to at least 2 decimal places.)2. Find the monopolist's profit-maximizing pricearrow_forwardAnswer it correctly please...arrow_forwardSuppose the inverse demand for a monopolist's product is given by P(Q) = 70 – .50 The monopolist can produce output in two plants. The marginal cost of producing in plant 1 is MC, = 3Q, and the marginal cost of producing in plant 2 is MC, = Q2. How much out- put should be produced in each plant to maximize profits, and what price should be charged for the product?arrow_forward
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