Question: QUESTION 3 Snow Security Services is a monopolist in the market for freeze-resistant wall-top security cameras. The firm has fixed costs of 20 and

QUESTION 3 Snow Security Services is a monopolist in the market for

QUESTION 3 Snow Security Services is a monopolist in the market for freeze-resistant wall-top security cameras. The firm has fixed costs of 20 and a constant marginal cost of 5 at all levels of output. The demand function for the market is given by D (p) 12.5 0.25p. (a) Rewrite demand as the inverse demand function. (b) Set up the monopolist's problem and solve for the optimal price and quantity. (c) Calculate the maximized profit for Snow Security Services. QUESTION 4 Suppose that the inverse demand function for a monopolist's product is p(q) = 9 -0.05q while the firm's total cost function is C(q) = 10 + 10g - 4q + q. (a) Plot or sketch carefully the demand curve, marginal revenue curve, and marginal cost curve. (b) At what volume of output does marginal revenue equal marginal cost? (c) What are the profit-maximizing output and price? (Note: you should check the second-order condition to verify that your answer is a maximum).

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Answer 1 a The monopolists profitmaximizing output is the quantity of output where marginal revenue is equal to marginal cost This quantity of output is the quantity at which the monopolists total rev... View full answer

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