Suppose a monopolist firm has the following normal demand function: Q = 30-0.2P. The firm's total...
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Suppose a monopolist firm has the following normal demand function: Q = 30-0.2P. The firm's total cost function is given by: TC = 50+ 10Q + 3Q. Use this information to answer questions in Part A below (NOTE: There is also a Part B to this problem). PART A: a. Write the expression for the inverse form of the firm's demand equation (i.e. P = a - bQ). b. Write the expression for marginal revenue (MR). c. Write the expression for marginal cost (MC). d. What is the monpolist's profit-maximizing quantity (Q*) and price (P*)? NOTE: Use the expressions above to help calculate the profit-mazimizing quantity and price in the boxes below. Q*: P*: e. Calculate the monopolist's markup and percent markup at the profit-maximizing price and quantity. Markup: Percent Markup: f. Using the relevant information from above and the inverse elasticity pricing rule (IEPR), calculate the price elasticity of demand at the monopolist's profit-maximizing price and quantity. NOTE: Your answer should include the appropriate arithmetic sign. Price Elasticity of Demand: PART B: Suppose, for a different monopolist, you had only the following information: Marginal cost (MC) and price elasticity of demand () are both constant, with MC = $60 and = -3. g. Using this information and the inverse elasticity pricing rule (IEPR), calculate the monopolist's profit-maximizing price (P*). P*: Suppose a monopolist firm has the following normal demand function: Q = 30-0.2P. The firm's total cost function is given by: TC = 50+ 10Q + 3Q. Use this information to answer questions in Part A below (NOTE: There is also a Part B to this problem). PART A: a. Write the expression for the inverse form of the firm's demand equation (i.e. P = a - bQ). b. Write the expression for marginal revenue (MR). c. Write the expression for marginal cost (MC). d. What is the monpolist's profit-maximizing quantity (Q*) and price (P*)? NOTE: Use the expressions above to help calculate the profit-mazimizing quantity and price in the boxes below. Q*: P*: e. Calculate the monopolist's markup and percent markup at the profit-maximizing price and quantity. Markup: Percent Markup: f. Using the relevant information from above and the inverse elasticity pricing rule (IEPR), calculate the price elasticity of demand at the monopolist's profit-maximizing price and quantity. NOTE: Your answer should include the appropriate arithmetic sign. Price Elasticity of Demand: PART B: Suppose, for a different monopolist, you had only the following information: Marginal cost (MC) and price elasticity of demand () are both constant, with MC = $60 and = -3. g. Using this information and the inverse elasticity pricing rule (IEPR), calculate the monopolist's profit-maximizing price (P*). P*:
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PART A a Write the expression for the inverse form of the firms demand equation ie P a bQ Inverse de... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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