Consider the following demand functions and total cost function faced by a monopolist where Q is output, PL is the price based on low demand, and PH is the price based on high demand.
Q = 50 – 0.25PL Low Demand Function
Q = 200 – 0.50PH High Demand Function
TC = 2,500 + 50Q + 0.50Q2 Total Cost Function
Suppose that there is a 75% chance of low demand and a 25% chance of high demand.
1) Determine the monopolist’s profit maximizing level of output.
2) Determine the monopolist’s expected profit maximizing price.
Question #2
Consider the following demand function for frozen dinners where QD is the quantity of frozen dinners demanded per week, P is the price per frozen dinner, PF is the price per fast food meal, Y is the average yearly consumer income, and A is the number of advertisements for frozen dinners.
Demand Function for Frozen Dinners: QD = 1,000 – 10P + 20PF – 0.01Y + A
Suppose that a frozen dinner sells for $4, a fast food meal sells for $6, average yearly consumer income is $50,000, and that there are 20 advertisements for frozen dinners.
Consider the following demand functions and total cost function faced by a monopolist where Q is output, PL is the price based on low demand, and PH is the price based on high demand.
Q = 50 – 0.25PL Low Demand Function
Q = 200 – 0.50PH High Demand Function
TC = 2,500 + 50Q + 0.50Q2 Total Cost Function
Suppose that there is a 75% chance of low demand and a 25% chance of high demand.
|
Price
|
Quantity Demanded
|
|---|---|
| $25 | 20 |
| $20 | 40 |
| $15 | 60 |
| $10 | 80 |
| $5 | 100 |
|
Interval
|
Price Elasticity of Demand
|
Elastic, Inelastic, or Unit Elastic
|
|---|---|---|
| From P = $25 to P = $20 | ||
| From P = $20 to P = $15 | ||
| From P = $15 to P = $10 | ||
| From P = $10 to P = $5 |
|
Consider the following. Demand Function Quantity Demanded
p = 800 − 3x x = 19
Find the price elasticity of demand for the demand function at the indicated x-value.
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