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##### The demand that a monopoly faces is

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**Question**

1. The demand that a monopoly faces is: p = 100 Q2, where Q is the quantity, and p is the;price. Its marginal cost of production is 10, and its cost of a unit of advertising is 1. What;is the firms profit equation? Solved for the firms profit maximizing price and quantity.;(4 marks);2. Claudia is a monopolist producer of silk scarves. Her demand curve, total revenue curve;marginal revenue curve and total cost curves are given as follows;Q = 160 4P;TR = 40Q Q2;MR = 40 Q;TC = 4Q;MC = 4;What is the maximum profit that she can earn? Calculate this profit and illustrate it on a;graph. (6 marks);3. Two firms are planning to sell 10 or 20 units of their goods and face the following playoff;matrix (5 marks);Firm 2;10 20;Firm 1;10 (30, 30) (50, 35);20 (40, 60) (20, 20);a) What is the Nash equilibrium if both firms make their decisions simultaneously?;Why?;b) Suppose Firm 1 can decide first, what is the outcome? Why?;c) Suppose Firm 2 can decide first, what is the outcome? Why?

Paper#29640 | Written in 18-Jul-2015

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