b Candice is risk vesk averse an Hec d. Candice t have linear uiity of wealth fu

Question

b Candice is risk vesk averse an Hec d. Candice t have linear uiity of wealth function A monopolist CO) 40 +4Q+40 faces inverse market demand of P = 40 and has Total Cost given 6. Find this monopolist's profit maximizing output level 7. Find this monopolist's profit maximizing price. 8. How much profit is this monopolist earning? 9. (20 points) Suppose this monopolist can first degree price disc will the monopolist supply to the market? (Hint: when 1st deg MR = 40-2). 2 10. Suppose a monopolist recognizes that elderly customers their product than younger customers. Specifically, inve P = 30-Qs, while inverse demand by the young is g degree price discriminates by selling to each group at costs are given by: TC(Q) = 100 + 100, what price

Explanation / Answer

Question 6

Inverse demand function is as follows -

P = 40 - (Q/2)

Calculate the Total Revenue -

TR = P * Q = [40 - (Q/2)] * Q = 40Q - (Q2/2)

Calculate the Marginal Revenue -

MR = dTR/dQ = d[40Q - (Q2/2)]/dQ = 40 - Q

TC = 4Q2 + 4Q + 40

Calculate the Marginal Cost -

MC = dTC/dQ = d(4Q2 + 4Q + 40)/dQ = 8Q + 4

A monopolist maximizes profit when it produce that level of output at which MR equals MC

40 - Q = 8Q + 4

9Q = 36

Q = 4

This monopolist's profit-maximizing level of output is 4 units.

Question 7

Profit-maximizing level of output, Q = 4 units

Calculate the profit-maximizing price -

P = 40 - (Q/2) = 40 - (4/2) = 38

This monopolist's profit-maximizing price is $38 per unit.

Question 8

Calculate Profit -

Profit = Total Revenue - Total Cost = (P*Q) - (4Q2 + 4Q + 40) = ($38 * 4) - [4*(4)2 + (4*4) + 40] = $32

This monopolist is earning profit of $32.

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