MBA7220-01 Exam II, October 25, 2017 (To be turned in on November 8, 2017) B. Fa

Question

MBA7220-01 Exam II, October 25, 2017 (To be turned in on November 8, 2017) B. Farmer Print Name Sign Name 1 (2) 1. Amonopolist has a constant marginal and average cost of $10 and has a demand curve of Qp 1000-10P a) Calculate marginal revenue function: e b) The monopolist's profit maximizing quantity is: c) The monopolist's profit maximizing price is: d) The monopolist's profit maximizing profit is: - (2) 2. The Demand Curve for a monopolist is Qp 500-2P; MC-$50/unit: ATC = $50/unit a) profit maximizing output is b) profit maximizing price is:_ c) profit is: d) Lerner Index for this industry is 3, For a monopolistic competitive firm: Price-S80; MR = $40; ATC-$100; MC-S40; AFC-$10. To maximize profit, the firm should produce a smalleroutput and sell it at a higher price. a) True b) False (05) Page 1 of 5

Explanation / Answer

question 1 .

a) We have Qd= 1000 -10P

so, the inverse demand fucntion = 10P = 1000 - Q

or P = 100 - 0.1Q

TR = 100Q - 0.1Q2

MR = 100 - 0.2Q

a) So, the marginal revenue fucntion = 100 -0.2Q

b) for profit maximizng quantity , MR=MC

we have MC =10

100 -0.2Q = 10

90 = 0.2Q or Q = 450

c) profit-maximizng price = P = 100 -0.1*450 = 55

Price = $55.

D) Monopoly's profit = TR -TC

TR = 100*450 - 0.1*202500

TR= 45000 - 20250 = 24750

TC = 10*450= 4500

PRofit = 24750 -4500 = $ 20250

for 2) please upload it again. its against chegg policy.

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