A firm is a monopoly in a protected (home) market with demand given by Q(P) = 28 – 2P. The firm’s cost function is TC =
Posted: Mon Apr 25, 2022 7:27 am
A firm is a monopoly in a protected (home) market with demand
given by Q(P) = 28 – 2P. The firm’s cost function is TC = 4q. The
firm has a capacity of K = 20 units.
A. What is the profit maximizing P and q for the monopolist?
Now suppose the firm can also sell (the same product) in world
the market, where the world price is Pw = 5. In the world market
the firm is a competitive firm: It assumes that it can sell any
quantity in the world market at price Pw = 5. Let qw be the
quantity it sells in the world market, and let qd be the quantity
it sells in the home market.
What are the profit maximizing qw, and qd?
What is the price in the home market?
What is the deadweight loss? Here it is perhaps it is helpful to
ask: What is the home market
quantity qd that maximizes the sum consumer surplus in the home
market and the firm’s total profits (world and home market
profits)?
given by Q(P) = 28 – 2P. The firm’s cost function is TC = 4q. The
firm has a capacity of K = 20 units.
A. What is the profit maximizing P and q for the monopolist?
Now suppose the firm can also sell (the same product) in world
the market, where the world price is Pw = 5. In the world market
the firm is a competitive firm: It assumes that it can sell any
quantity in the world market at price Pw = 5. Let qw be the
quantity it sells in the world market, and let qd be the quantity
it sells in the home market.
What are the profit maximizing qw, and qd?
What is the price in the home market?
What is the deadweight loss? Here it is perhaps it is helpful to
ask: What is the home market
quantity qd that maximizes the sum consumer surplus in the home
market and the firm’s total profits (world and home market
profits)?