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4) Consider a monopolist who faces the inverse demand function p = 1 – Y and mnarginal revenue MR = 1 – 2y a) Find the price elasticity of demand. as a function of y using the elasticity formula Ay p Дру Price elasticity of Demand b) Set up the profit function when the monopolist faces the cost c(y) = y/2 (marginal cost=1/2) and c(y) = y² (marginal cost =2y) c) Calculate the value of y for each cost function. d) What is the elasticity at the monopolists choice of output for each cost function. That is what is the value of the price elasticity of demand for the function you calculated above (All you have to do is plug the y you calculated into the function you derived above) e) What is the efficient price for each cost function? (Hint:What is an efficent price in a perfectly competitive market) f) What is the deadweight loss generated by the monopolist for each cost function? Show this graphically.

4) Consider a monopolist who faces the inverse demand function p = 1 – Y and mnarginal revenue MR = 1 – 2y a) Find the price elasticity of demand. as a function of y using the elasticity formula Ay p Дру Price elasticity of Demand b) Set up the profit function when the monopolist faces the cost c(y) = y/2 (marginal cost=1/2) and c(y) = y² (marginal cost =2y) c) Calculate the value of y for each cost function. d) What is the elasticity at the monopolists choice of output for each cost function. That is what is the value of the price elasticity of demand for the function you calculated above (All you have to do is plug the y you calculated into the function you derived above) e) What is the efficient price for each cost function? (Hint:What is an efficent price in a perfectly competitive market) f) What is the deadweight loss generated by the monopolist for each cost function? Show this graphically.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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4) Consider a monopolist who faces the inverse demand function p = 1 – y and mnarginal revenue MR = 1 – 2y a) Find the price elasticity of demand. as a function of y using the elasticity formula Ay p Дру Price elasticity of Demand b) Set up the profit function when the monopolist faces the cost c(y) = y/2 (marginal cost=1/2) and c(y) = y² (marginal cost =2y) c) Calculate the value of y for each cost function. d) What is the elasticity at the monopolists choice of output for each cost function. That is what is the value of the price elasticity of demand for the function you calculated above (All you have to do is plug the y you calculated into the function you derived above) e) What is the efficient price for each cost function? (Hint:What is an efficent price in a perfectly competitive market) f) What is the deadweight loss generated by the monopolist for each cost function? Show this graphically.
Transcribed Image Text:4) Consider a monopolist who faces the inverse demand function p = 1 – y and mnarginal revenue MR = 1 – 2y a) Find the price elasticity of demand. as a function of y using the elasticity formula Ay p Дру Price elasticity of Demand b) Set up the profit function when the monopolist faces the cost c(y) = y/2 (marginal cost=1/2) and c(y) = y² (marginal cost =2y) c) Calculate the value of y for each cost function. d) What is the elasticity at the monopolists choice of output for each cost function. That is what is the value of the price elasticity of demand for the function you calculated above (All you have to do is plug the y you calculated into the function you derived above) e) What is the efficient price for each cost function? (Hint:What is an efficent price in a perfectly competitive market) f) What is the deadweight loss generated by the monopolist for each cost function? Show this graphically.
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