A monopoly that produces beer has estimated the following demand function: 1 p(q) = 300 - q+ 20t 3000 The variables are defined as follows: p is the price of a liter of beer, q is production, and t is the monthly average temperature in degrees centigrade. The estimated cost of producing a liter of beer is $12. Below is a table with the average temperature recorded in Arizona during March and April. Month Temperature March 35 April 38 a) Find the optimal price for the monopolist in each month b) Calculate the Mark-up for April and according to it estimate the elasticity of demand. Comment on the results. C) Determine the efficiency loss in the month of March.

A monopoly that produces beer has estimated the following demand function: 1 p(q) = 300 - q+ 20t 3000 The variables are defined as follows: p is the price of a liter of beer, q is production, and t is the monthly average temperature in degrees centigrade. The estimated cost of producing a liter of beer is $12. Below is a table with the average temperature recorded in Arizona during March and April. Month Temperature March 35 April 38 a) Find the optimal price for the monopolist in each month b) Calculate the Mark-up for April and according to it estimate the elasticity of demand. Comment on the results. C) Determine the efficiency loss in the month of March.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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