Question

(Requires Read More Online 17.1.) Kalamazoo Competition-Free Concrete (KCC) is a local monopolist of ready-mix concrete. Its annual demand function is

          Q^d = 10,000 - 200P

where P is the price, in dollars, of a cubic yard of concrete and Q is the number of cubic yards sold per year. Suppose that Kalamazoo's marginal cost is $20 per cubic yard. Assume for simplicity that it has no fixed costs.

a. What is its profit-maximizing sales quantity and price?

    Q =  units.

    P = $.

b. Now suppose there is a demand curve with a slope of 0.0025 that goes through the price and quantity chosen by KCC?

	P = 42.50 - 0.0025 Q.
	P = 42.50 - 0.010 Q.
	P = 50 - 0.0025 Q.
	P = 50 - 0.010 Q.

c. With this demand curve, what is KCC's profit-maximizing sales quantity and price?

    Q =  units.

    P = $.

d. How does it compare to KCC's profit-maximizing sales quantity and price with the original demand curve?

	As the demand curve's slope becomes flatter, the profit-maximizing price decreases and the profit-maximizing quantity decreases.
	As the demand curve's slope becomes flatter, the profit-maximizing price increases and the profit-maximizing quantity decreases.
	As the demand curve's slope becomes flatter, the profit-maximizing price decreases and the profit-maximizing quantity increases.
	As the demand curve's slope becomes flatter, the profit-maximizing price does not change and the profit-maximizing quantity does not change.
	As the demand curve's slope becomes flatter, the profit-maximizing price increases and the profit-maximizing quantity increases.

e. How does this comparison relate to the discussion in Read More Online 17.1?

	As the demand curve becomes more elastic, the monopolist's marginal cost decreases.
	As the demand curve becomes more elastic, the monopolist's marginal revenue increases.
	As the demand curve becomes more elastic, the monopolist's Lerner Index increases.
	As the demand curve becomes more elastic, the monopolist's price-cost margin increases.
	As the demand curve becomes more elastic, the monopolist's markup decreases.

Answer 1