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##### The demand that a monopoly faces

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solution

**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 firm?s profit equation? Solve for the firm?s profit maximizing price and quantity.;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.;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#29666 | Written in 18-Jul-2015

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