Bonus (5 points) True or False: Consider a monopolist which produces two interrelated goods A and B with QA(PA, PB) and QB(PA, Pa) where Q is the demand and P is the price. If dA-0, the firm could ch...
A firm produces two different goods, with demand given by the following: Pa = 100 – 3Qa + 2Qb and Pb = 105 – 8Qb Where Pa = price of good A, Pb = price of good B, Qa = quantity of good A and Qb = quantity of good B. The marginal costs for the two goods are 12 for good A and 15 for good B. Determine optimal prices and quantities for each good.
1. (25 points) Suppose that a monopolist faces the inverse demand curve: P 100-Q and produces goods at a marginal cost of $5. Finally assume that the firm incurs no fixed costs A. Suppose the monopolist lowers the price from $90 to $89. Explain why the firm's marginal revenue is less than the price of the 11th unit sold, $89 (do not answer this question by providing a mathematical equation). B. At what price will the monopolist maximize its profit?...
Question 2: A monopolistic firm produces goods in a market where the demand function is P = 43 - 0.3Q and the corresponding total cost function is TC =0.0103 – 0.4Q2 +3Q (a) What can you say about the fixed costs of this firm? (b What can you say about the variable costs of this firm? (c) Find the (non-zero) output for which average cost is equal to marginal cost, and explain the significance of this value. (d Find the...
1) Decreasing returns to scale may occur as increasing the amount of inputs used A) increases specialization B) may cause coordination difficulties. C) always increases the amount of output produced D) increases efficiency. 2) Which of the following statements is NOT true? A) AFC = AC - AVC C) AVC = wage/MPL B) AC = AFC + AVC D) C=F-VC 3) The more elastic the demand curve, a monopoly A) will have a larger Lemer Index. will face a lower...
usion (24 points) Two firms are playing a repeated Bertrand game infinitely, each with the same marginal cost 100. The market demand function is P-400-Q. The firm who charges the lower price wins the whole market. When both firms charge the same price, each gets 1/2 of the total market. I. Coll A. (6 points) What price will they choose in the stage (only one period) Nash equilibrium? What price will they choose if in the stage game (only one...