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A monopolist faces a demand curve P = 64-2Q and MR = 64-4Q. His marginal cost is MC = 16.
(a) Graph the three functions and compute the profit maximizing output and price.
(b) Compute the efficient level of output (where MC=demand), and compute the DWL associated with producing the profit maximizing output rather than the efficient output.
(c) Suppose the government gave the monopolist a subsidy of $4 per unit produced. The MC would be reduced accordingly to $12 from $16. Compute the profit maximizing output level and the deadweight loss associated with this new output. Explain intuitively why the DWL has changed.
Simpkins Corporation is expanding rapidly, and it does not pay and dividends because it currently needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years.
Calculate the present worth (year 0) of a lease that requires apayment of $20,000 now and amounts increasing by 5% per year through year 10. Use an interestrate of 14% per year.
Suppose the consumer has $100 to spend on consumptionnow (c1) or consumption next year (c2). Any money not spent now can be deposited in a bank account, accumulating interest at an annual rate of 10%, and then withdrawn for spending next year. The..
The Crockett Land Winery must replace its present grape-pressing equipment. The two alternatives are the Quik-Skwish and the Stomp-Master. The annual operating costs increase by 12% each year as the machines age. If the interest rate is 9%, which ..
A decision maker wishe to minimize the cost of producing a given level of total benefit, B = 288. The cost function is C = 6x + 3y and the total benefit is B = xy. Set up the Lagrangian adn then determine the levels of x and y at the minimum level..
Calculate the market demand. Assume that the market price for the good is $4 due to perfectly elastic industry supply. Using the market demand function, calculate the total consumers surplus. Calculate the total consumers surplus using individual ..
suppose the demand for a product is given by p 40 - 4q. also the supply is given by p 10 q. if a 10 per-unit excise
Calculate the profit-maximizing point: MR - MC = 0. Explain your answer and calculate the revenue-maximizing level of output.
Examine the influence of your own personal values as it relates to diversity issues presented in the case.
Illustrate your answer by assuming that with advertising, a firm's demand curve has price elasticity of -1.5 and without advertising, it is -2. If MC is $10, what is the difference in the profit-maximizing price.
The market price is currently $1 per poster. She has fixed cost of $250. Her variable cost are $1000 for the first thousand posters, $800 for te second thousand, and then $750 for each additionl thousand posters.
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