14. Suppose that the demand for bentonite is given by 0-40 0.5P, where Q is in t

Question

14. Suppose that the demand for bentonite is given by 0-40 0.5P, where Q is in tons of bentonite per day and P is the price per ton. Bentonite is produced by a monopolist at a constant marginal and average total cost of S10 per ton. How much profit is earned per day if the profit-maximizing quantity of bentonite is sold at the profit-maximizing price? a. $175 b. $600 c. $787.50 d. $612.50 15. In Louisiana, it was a crime to sell burial caskets without a funeral director's license. This law was a source of for licensed funeral directors and an example of a. b. c. d. market power; a government-sanctioned barrier to entry market power, a natural monopoly product differentiation; scale economies scale economies; a natural monopoly

Explanation / Answer

1- a monopoly produced where MR = MC

THUS 80-4Q= 10

THUS THE Q = 17.5, HERE P = 45

SO PROFIT = (P-MC)(Q)= (45-10)(17.5) = 612.5

2- IN THIS CASE THIS IS BASICALLY AN EXAMPLE OF MARKET POWER THAT FUNERAL DIRECTOR HAS AND THUS CAN CHARGE HIGHER PRICES, ALSO THIS BECOMES AN EXAMPLE OF A GOVERNMENT SCANTIONED BARIER TO ENTRY IN THE MARKLET.

SO ANSWER IS a

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