Calculate profit-maximizing price and quantity, Macroeconomics

Assignment Help:

A monopolist faces the following demand function for its product: Q = 45 - 5P The fixed costs of the monopolist are $12 and the variable costs are $5 per unit.
a) What are the profit-maximizing price and quantity? What will be the profits at these price and output levels?

Here Demand function is given by, Q = 45 -5P

ð  P =( 45-Q)/5........... (i)

No w Revenue is given by  ,

 R =  Q * P

ð  R =  Q * ( 45-Q)/5 )..... from  (I )

ð  R = 9Q-Q^2/5.... (II)

Here Marginal Revenue which is derivative of ( II), so,

MR =9-2Q/5 ..... (iii)

 Here marginal cost should be equal to Variable cost which is MC =5

At profit maximization,

MC = MR

ð  9-2Q/5 =5

ð  Q = 10

Hence, 10 is the profit maximizing quantity and the price is given from (i) which is 7. The profit is (7*10-12-5*7) =23

b) If the government imposes an annual tax on the firm of $10, what will be the profit-maximizing price, output, and profits? Who bears the burden of the tax? Why?


Related Discussions:- Calculate profit-maximizing price and quantity

Outline each approach as positives and negatives, In a group environment, s...

In a group environment, should leaders be assigned at the beginning of a project or should leaders emerge as the group is working on the project? Outline the positives and negative

Change of production possibilities curve affects, Analyze the relationship ...

Analyze the relationship between the production possibilities curve and the circular flow diagram. Discuss how the change of production possibilities curve affects the circular flo

LM or IS curve, I''m trying to figure out what the effect would be on LM or...

I''m trying to figure out what the effect would be on LM or IS curve, and additionally the interest rate and income if (a) the transactional demand for money increases, (b) the liq

Explain about economic growth rate, Explain about Economys growth rate ...

Explain about Economys growth rate Economy's growth rate: Long-term economic growth, or tendency growth, is the rate of growth the economy can sustain, ignoring the short-term

Income elasticity, If 5000 units are sold and income increases by 20% with ...

If 5000 units are sold and income increases by 20% with an income elastiticy of +2, what will the number of sales units be after the increase

Impact of minimum wage law, Minimum wage laws are common in many countries....

Minimum wage laws are common in many countries. The debate over minimum wage includes claims about the impact of this action on employment levels and wage levels. What impact does

Decrease the market equilibrium monthly rent, Suppose that the government w...

Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many units of

Towards a national accounting system, TOWARDS A NATIONAL ACCOUNTING SYSTEM ...

TOWARDS A NATIONAL ACCOUNTING SYSTEM  A real life modern economy is a very complex structure consisting of millions of units engaged in a variety of economic transactions. Ther

Illustrate the problem for economic performance, Illustrate the problem for...

Illustrate the problem for UK economic performance This is a foremost problem for UK economic performance and helps elucidate the persistent deficit on the current account of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd