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Assignment 9: Problem 1: a, Quantity Price ($) Total Marginal Total Average Marginal Revenue Revenue cost ($) Total cost ($) ($) ($) cost ($) 0 8.5 0 5.0 1 8.0 8.0 8.0 9.0 9.0 4.0 2 7.5 15.0 7.0 11.5 5.75 2.5 3 7.0 21.0 6.0 12.5 4.167 1.0 4 6.5 26.0 5.0 13.5 3.375 1.0 5 6.0 30.0 4.0 14.0 2.8 0.5 6 5.5 33.0 3.0 16.0 2.67 2.0 7 5.0 35.0 2.0 20.0 2.86 4.0 8 4.5 36.0 1.0 25.0 3.125 5.0 9 4.0 36.0 0 32.0 3.55 7.0 10 3.5 35.0 -1 40.0 4.0 8.0
b, The monopolist will produce at the quantity that give them maximum profit,
which MR = MC in this situation, the quantity that have MR = MC will help
monopolist to maximize the profit, so they should produce Q = 6.
c, With the quantity of 6 units, the monopolist has to charge P=5.5 ( $)
d, At the price of 5.5 $, they make a profit of Problem 2: a,
So that the firm isn't a perfect competitive firm. The firm is monopoly.
b, To maximize the TR, the firm should produce the quantity at which:
So the firm should produce Q = 50 units to maximize TR With c,
To maximize the profit, the firm should produce the quantity where:
d, If the government imposes a tax of 8$ per unit of goods sold, the firm have to
pay extra cost, so we have the new total cost:
To maximize profit MC new = MR 100 - 2Q = 12 + 2Q Q = 22
With Q = 22 P = 100 - 22 = 78 $
e, If the government imposes a fixed tax of 100$: To maximize profit With Problem 3: a, To maximize profit
So the optimal quantity is 4 units and optimal price is 11$
According to Lenner indicator, the market power of the firm is:
b, The firm is a perfect competitive market when the demand curve intersects the marginal cost curve. So:
So the price and optimal quantity for perfect competitive market is Q=8 units and P=7$
The Dead-weight Loss is equal to the area of ABE:
So the firm have the Dead-weight Loss: DWL = 8$ Problem 4: a, To maximize profit
The consumer surplus is equal to the area of AIP* :
The Dead-weight Loss is equal to the area of AEB:
c, The firm applied perfect price discrimination, which set all the price level on
the demand curve and expand the output to ( where MC = P) so the price in this situation is P = 100 - = 68$
d, Perfect price Discrimination firm increases profit by taking more CS and DWL.