Question

Questions 30 through 34 are based on the following information: Demand for a good q is given by p(q)-A-aq. A monopolist produces q with cost function c(q)-B+Bq. 30) Find the profit maximizing price p and quantity qM 31) Is the p you determined in 30), increasing or decreasing in A? 32) At the output level a you determined in 30), what is the average cost paid by the monopolist? 33) Is the average cost you determined in 32) increasing or decreasing in a and B? 34) How high can fixed costs be and still permit the monopolist to make non-negative profit by choosing the q you determined in 30)?

Answer 1

Plq) = A -aq 1 clqi- B B + ß q MR = A-209 / me=B Prosit is max when M Ramc * CA-BZ = 2A-A+B A TB 20 monopoly price is increasing in A. al A S2 c(q) = B + BQ & B+B {A-B7 Ac- B A - B & B ga B + B = A-j o2х 3) AC 4 danassing in is in increasing in ß & C Alpha).