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April 16, 2014

Homework Help: econ

Posted by LB on Tuesday, July 5, 2011 at 9:50pm.

1. Consider a pure monopolist with short-run total cost function given by
STC = 1000 +200 Q + 12.5 Q2. Suppose also that this firm faces an inverse market demand function given by P = 800 – 20 Q.
a. How much should this firm produce and what price should it charge in order to maximize profits?
b. How much economic profit (or loss) would this firm earn?
c. What is the value of this firm’s demand elasticity at its profit-maximizing price?
d. What is the Lerner Index for this firm? LI = -1/ Ed = 0.30

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