2. A monopolist produces its output in two factories, whose cost curves are given by C1 (q1) = 10q and C2 (q2) = 10q3 where qi and q2 are the amounts produced at each factory. The demand for the firm's product is given by P = by the monopolist. (a) On a diagram, illustrate the monopolist's decision about how much to produce at each factory and overall and the price to charge. Briefly explain your diagram. (b) Numerically calculate the monopolist's optimal choices for q1, 42, Q, and P. (c) Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm change (i.e. raise, lower, or leave unchanged) each of the values you found in (b)? Your answer should be qualitative, not quantitative. A diagram might be useful but is 700 – 5Q where Q is the total quantity sold not necessary.
2. A monopolist produces its output in two factories, whose cost curves are given by C1 (q1) = 10q and C2 (q2) = 10q3 where qi and q2 are the amounts produced at each factory. The demand for the firm's product is given by P = by the monopolist. (a) On a diagram, illustrate the monopolist's decision about how much to produce at each factory and overall and the price to charge. Briefly explain your diagram. (b) Numerically calculate the monopolist's optimal choices for q1, 42, Q, and P. (c) Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm change (i.e. raise, lower, or leave unchanged) each of the values you found in (b)? Your answer should be qualitative, not quantitative. A diagram might be useful but is 700 – 5Q where Q is the total quantity sold not necessary.
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 15CQ
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Transcribed Image Text:2. A monopolist produces its output in two factories, whose cost curves are given by C1 (q1) =
10q and C2 (q2)
demand for the firm's product is given by P = 700 – 5Q where Q is the total quantity sold
by the monopolist.
(a) On a diagram, illustrate the monopolist's decision about how much to produce at each
factory and overall and the price to charge. Briefly explain your diagram.
(b) Numerically calculate the monopolist's optimal choices for qı, q2, Q, and P.
(c) Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the
firm change (i.e. raise, lower, or leave unchanged) each of the values you found in (b)?
Your answer should be qualitative, not quantitative.
10q3 where q1 and q2 are the amounts produced at each factory. The
diagram might be useful but is
not necessary.
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