A monopoly has the following demand curveqi = β0 + β1pi + i; withi∼i.i.d.N(0,σ2), i = 1,2,3,...,15
In addition, there is information on the prices set and thesales obtained in the past.
1 (12.24 KiB) Viewed 19 times
Assume that the marginal cost is $10. Based on the least squaresestimators of the parameters β0 and β1,
a) Determine the output of the monopoly. Note, the monopolistwill maximize his profits when MC=IMg. The IMg function is definedas the line with twice the slope of the inverse demandequation.b) Obtain the corresponding production under conditions of perfectcompetition. According to the theory,in perfect competition equilibrium occurs when MC=P.
Q 3 3 P 18 16 7 17 6 12 10 15 15 16 13 15 4 9 15 9 15 6 8 13 11 12 18 21 7 7 10 7
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!