Question

1. A single firm monopolizes the entire market for single-lever, ball-type faucets, which it can produce at a cost of 20Q. Originally the firm faces an inverse market demand curve given by P=80-Q.

1. Calculate the profit-maximizing price and quantity for the firm.
2. Suppose that the market demand curve shifts outward and becomes steeper. Market demand is now described as P=100-2Q. What is the firm’s profit maximizing price and quantity now? What is the firm’s profit?
3. Assume now that the market demand shifts outward and becomes flatter, so that demand is now P=60- ½ Q. Now, what is the firm’s profit-maximizing price and quantity combination? What is the profit?

Answer 1

ANSWER cost c= 200. MC 20 Demond - P= 8o - Q Revenue - Pricex PO cuantity &Q-Q2. Marginal Revenue do-20. ca profit Margine output maximizing level of Revente CMC HR). where Marginal cost equal 8o. 20. 20 20r 60 06-30 Q. 30 units P &o- Q o for 30 Pe $50 price $50, Orantily - 30 anits. chy p= 100-20. Resence too Q 20² MR. 100-40 116= 20

profit maximizing condition where MerR. 100-40= 20 40. do 6. do 20 On 20 canits. P- too- 20 = $60-2(20) a 10o – 40 Pep. 60 Revente a lost . Revenue a fi cek Dualla 60 x 20 1200 . Cost 20(20) prafat - 1200 - 400 proft. - $ 800 P= 60 g Cour иче о - о MR 60-Q.

MC- 20 condition (ME=MR) Marginal cost equal profit memimizing Marginal Revenue 6o - Q- 20 Q2. 40 0: 40 units. Pr 60-9 & 600 4620 - Co-20 P= $40. profit Oran Hity a 40 units maximizing pricee Sho, م جه این اثر داروی ام ) م profita Revenue - 40x90 $1600 Cost 200 20x 40 - 8800 profit. 1600 - 800 $ 800 So profit 4800