Point-elasticity of demand at the profit-maximizing output

Reference no: EM13685011

A monopolist has access to an industry with market demand P = 10 ? y where y is the firm’s quantity. Its cost function is C(y) = 2y

1. Decide the firm’s profit maximizing quantity. Show your outcome on a graph. What is the firm’s profit? Calculate the point-elasticity of demand at the profit-maximizing output.

2. Now presume the firm’s cost function is C(y) = 4y

Again determine the profit-maximizing quantity, profit and the elasticity at the profit-maximizing quantity. (No graph is required in this case.)

3. Essentially, we have two types of monopolist. Which monopolist kind operates at the higher level of elasticity? Why?

4. Prove that for any linear demand, p = a ? by, and constant marginal cost, c, that a monopolist would never ever operate at a point elasticity less than 1.

Reference no: EM13685011

Questions Cloud

Presume an economic is in long run equilibrium : Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium on a clearly labled graph. Label the equilibrium point A. be sure to include the short-run and long-run aggregate supply. The central bank raises the money s..

Assume than an oligopolistic is charging : Assume than an oligopolistic is charging $21 per unit of output and selling 31 units each day. Also suppose that previously it had lowered its price from $21 to $19, rivals matched the price cut, and the firm’s sales increased from 31 to 32 units. It..

Minimum number of compound interest factors : Calculate the capitalized cost for the following cash flows using the minimum number of compound interest factors. Should use the minimum number of compound interest factors.

Purchases tend to fall with decreases in buyers incomes : For most products, purchases tend to fall with decreases in buyers' incomes. Such products are known as ( ) “We have to decrease our dependence and consumption of fossil oil” is a----------- statement whereas “our decreased dependence and consumption..

Point-elasticity of demand at the profit-maximizing output : A monopolist has access to an industry with market demand P = 10 ? y where y is the firm’s quantity. Its cost function is C(y) = 2y. Decide the firm’s profit maximizing quantity. Show your outcome on a graph. What is the firm’s profit? Calculate the ..

Economy is experiencing inflation : If the economy is experiencing inflation, then the most appropriate government policy would be to:

What makes the rate of unemployment low : Which is one of the three fundamental questions that require to be dealt with in any economic system? What makes the rate of unemployment low? What goods and services will be produced?

Find the angular momentum of the disk : A uniform solid disk of mass 3.05 kilogram and radius 0.200 meter rotates about a fixed axis perpendicular to its face. If the angular frequency of rotation is 5.92 rad/s, find the angular momentum of the disk when the axis of rotation passes throug..

Evaluate what is the unknown charge : A Gaussian surface has thirty field lines leaving it when it surrounds a point charge of +10.0 µC and seventy field lines entering it when it surrounds an unknown point charge. Evaluate what is the unknown charge

User Account

All Pages