In: Economics
Suppose a monopolist faces a demand curve given by p(y) = 1/y^2
.
(a) Write down the monopolist's total revenue as a function of
y.
(b) Find the monopolist's marginal revenue as a function of
y.
(c) Find the demand elasticity for this demand curve. Note that
this is a demand curves
where the elasticity is the same at all points. (You can get rid of
all variables and find
the elasticity as a single number.)
(d) Suppose the monopolist's marginal cost function is positive for
all values of y (as most
marginal cost functions are). We will we not be able to find a
point that maximizes
prots for the monopolist. Why is this the case? You can explain
this using the
marginal revenue curve or by using your answer from part (c).