Question

5: Make the assumption that a monopolist is selling a product with inverse demand of p = 12 – 0.5q, p = price of the product while q = quantity of the product,. The monopolist’s marginal and average cost is 6. (a) Find the profit maximising level of q and p, and the firm’s profit. Find the profit maximising level of output and profit if the maximum price that can be charged per unit is (i) p = 7, (ii) p = 10. (b) What effect on the firm's price and output would a tax of 2 per unit have? What if the tax was 6 per unit?

Answer #1

5: Make the assumption that a monopolist is selling a product
with inverse demand of p = 12 –
0.5q, p = price of the product
while q = quantity of the product,. The
monopolist’s marginal and average cost is 6.
(a) Find the profit maximising level of q and
p, and the firm’s profit. Find the profit maximising level
of output and profit if the maximum price that can be charged per
unit is (i) p = 7, (ii) p = 10.
(b)...

Question 5
Assume that a monopolist sells a product with inverse demand
given by p = 12 – 0.5q,
where p is the price of the product
and q is its quantity, and the monopolist’s
marginal and average cost is equal to 6.
(a) Find the profit maximising level of q and
p, and the firm’s profit. Find the profit maximising level
of output and profit if the maximum price that can be charged per
unit is (i) p = 7, (ii) p =...

Assume that a monopolist sells a product with inverse demand
given by p = 12 – 0.5q,
where p is the price of the product
and q is its quantity, and the monopolist’s
marginal and average cost is equal to 6.
(a) Find the profit maximising level of q and
p, and the firm’s profit. Find the profit maximising level
of output and profit if the maximum price that can be charged per
unit is (i) p = 7, (ii) p = 10.
(b)...

Assume that a monopolist sells a product with inverse demand
given by p = 12 – 0.5q, where p is the price of the product and q
is its quantity, and the monopolist’s marginal and average cost is
equal to 6. Word limit per question: 400 words (200 words per part
of question)
(a) Find the profit maximising level of q and p, and the firm’s
profit. Find the profit maximising level of output and profit if
the maximum price...

A monopolist faces a demand curve P= 24 – 2Q, where P is
measured in dollars per unit and Q in thousands of units and MR=24
– 4Q. The monopolist has a constant average cost of $4 per unit and
Marginal cost of $4 per unit. a. Draw the average and marginal
revenue curves and the average and marginal cost curves on a graph.
b. What are the monopolist’s profits-maximizing price and quantity?
c. What is the resulting profit? Calculate...

A monopoly firm’s inverse demand function is p = 800 − 4Q + 0.2A
0.5 , where Q is its quantity, p is its price, and A is the level
of advertising. The firm’s marginal cost of production is 2, and
its cost for a unit of advertising is 1.
What are the firm’s profit maximising price, quantity, and level
of advertising? (

Suppose the inverse demand for a monopolist’s product is given
by
P (Q) = 20 – 3Q
The monopolist can produce output in
two plants. The marginal cost of producing in plant 1 is
MC1 = 20 +
2Q1
While the marginal cost of producing
in plant 2 is
MC2 = 10 +
5Q2
How much output should be produced in each plant?
What price should be charged?

Suppose the inverse demand for a monopolist’s product is given
by
P (Q) = 20 –
3Q
(Total marks = 5)
The monopolist can produce output in
two plants. The marginal cost of producing in plant 1 is
MC1 = 20 +
2Q1
While the marginal cost of producing
in plant 2 is
MC2 = 10 +
5Q2
How much output should be produced in each plant?
What price should be charged?

Q1. A monopolist has the following
demand function and marginal cost function P = 120 – Q and MC = 30
+ Q.
i. Derive the monopolist’s marginal revenue function.
ii. Calculate the output the monopolist should produce to
maximize its profit.
ii. (continuation)
iii. What price does the monopolist charge to maximize its
profit?
Now assume that the monopolist above split into two large firms
(Firm A and Firm B) with the same marginal cost as the
monopolist.
Let...

A monopolist faces the inverse demand for its output:
p = 30 – Q
The monopolist faces a cost curve: C(Q) = 5Q. The government is
seeking ways to collect
tax revenue from the monopolist by imposing an ad valorem tax of
20% on the
monopolist.
1)Draw an approximate graph to depict the before-tax and
after-tax price – quantity
combination (in one graph).

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