1.) Firm has monopoly power. Its demand equation is given by P(q) = 10 –q. Its...

1.) Firm has monopoly power. Its demand equation is given by P(q) = 10 –q. Its total cost of producing its output is given by the function TC(q) = (q2/8) + q+ 16, and it can be shown that its marginal cost equation is MC(q) = (q/4) + 1.1.

Profit maximization

a.Write down the firm’s marginal revenue equation, which expresses MR as a function of the firm’s output q.

b.Calculate the firm’s profit-maximizing output q*.

c.Calculate the price the firm would charge at the profit-maximizing output.

d.Calculate the firm’s marginal cost and marginal revenue at the profit-maximizing output.

e.Calculate the firm’s profit at the output and price you found in parts (b) and (c).Show your work.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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