A monopolist produces output and sells it in two distinct

Reference no: EM13379645

A monopolist produces output and sells it in two distinct markets, with revenue functions R1 & R2. The total cost of producing the output y1 for market 1 and y2 for market 2 is C (y1 + y2)

(1) Show that a profit maximizing monopolist equates marginal revenue in each market to the common marginal cost.

(2) Derive mathematically the formulas for the price-elasticity of demand and for the income-elasticity of demand. Interpret both measures (for example, assume that the price-elasticity of demand is -1.5 and write a sentence with this number.)

(3) Given a revenue function R (y), the average price for selling y units of output is p(y) = R(y) / y. Recall that elasticity of demand E is defined by

E(y) = -p(y)/yp'(y)

Show that R'(y) = p(1- 1/E(y)) and that the monopolist's price is higher in the market with the less elastic demand

Reference no: EM13379645

Questions Cloud

In the first quarter of 2009 president obama pushed his : in the first quarter of 2009 president obama pushed his massive fiscal stimulus package of 862 it was originally at 787

A producer produces good y using inputs x1 and x2 according : a producer produces good y using inputs x1 and x2 according to the production function y x1alphax2beta where alpha

Ast functioncy y2 1 if y gt 00 : a firm has cost functioncy y2 1 if y gt 00 if y 0let p be the price of output.1 if p 2 how much will

Airm has a long-run cost function c1y y3 - 10y2 30y1 : a firm has a long-run cost function c1y y3 - 10y2 30y.1 derive the firms long-run average cost function2 derive

A monopolist produces output and sells it in two distinct : a monopolist produces output and sells it in two distinct markets with revenue functions r1 amp r2. the total cost of

A producer produces good y using a single input x according : a producer produces good y using a single input x according to the production function yxa where 0ltalt1. the producer

A list 3 ways in which rents from quantitative : a list 3 ways in which rents from quantitative restrictions can be allocated. in which case is the quantitative

A in 2002 the united states introduced tariffs on certain : a in 2002 the united states introduced tariffs on certain steel imports from china and europe. one can argue that in

1 consider a country in which there are 2 sectors called : 1. consider a country in which there are 2 sectors called sector 1 and sector 2. the production functions and the

User Account

All Pages