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MGMT Assignment

1. The document provides 8 questions related to monopolies, oligopolies, and profit maximization for a group assignment. Students are asked to work in groups of 5 or less and submit answers to the questions by February 7, 2020. 2. Question 1 involves calculating profits for a perfectly competitive firm at different revenue levels. Question 2 involves profit maximization for a firm with a cubic cost function. 3. Questions 3-7 cover profit maximization for monopolies, including determining marginal revenue from demand, pricing discrimination across markets, and output levels. 4. Questions 5 involves an Cournot oligopoly model with two firms. Question 8 asks students to find the profit-maximizing output and price

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Abel Lema
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143 views

MGMT Assignment

1. The document provides 8 questions related to monopolies, oligopolies, and profit maximization for a group assignment. Students are asked to work in groups of 5 or less and submit answers to the questions by February 7, 2020. 2. Question 1 involves calculating profits for a perfectly competitive firm at different revenue levels. Question 2 involves profit maximization for a firm with a cubic cost function. 3. Questions 3-7 cover profit maximization for monopolies, including determining marginal revenue from demand, pricing discrimination across markets, and output levels. 4. Questions 5 involves an Cournot oligopoly model with two firms. Question 8 asks students to find the profit-maximizing output and price

Uploaded by

Abel Lema
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Group Assignment

1. Suppose a given firm operating in a perfectly competitively market.


TFC = birr 600
TVC = birr 500 and TR = birr 700.
Should the firm stay in the business? What will be you answer if the TR changes to birr 450?
2. Suppose cost of production of a firm is given by:
𝑻𝑪 = 𝟏𝟐𝟖 + 𝟓𝟎𝑸 − 𝟏𝟔𝑸𝟐 + 𝟐𝑸𝟑
a. What amount of the product should be produced to maximize profit of the firm if price
per unit output is 74? Find the maximum profit or loss.
b. What quantity of the product should be produced if price per unit is 40?
Find the maximum profit. What will be the decision of the firm to stay in production or
stop operation? Why?
c. What will be the decision of the firm if price per unit is 10?
d. What is the shut down price level?
e. Determine the supply function of the firm with domain or range of out put
1
3. Prove that 𝑀𝑅 = 𝑃 (1 − )
𝜀𝑃

4. Suppose the monopolist has two markets with demand curve given by
1
𝑄1 = 100 − 𝑃1
2
𝑄2 = 100 − 𝑃2
Assume that the monopolist`s marginal cost is constant at birr 20 a unit

a. If it can discriminate price, what price should it charge in each market in order to
maximize profit?
b. What will be the price if discrimination is not possible?
5. Suppose two cournot firms, each located in a different country sell only in a third countries
market. The two firms face the demand function 𝑃 = 𝑎 + 𝑏𝑄 where 𝑄 = 𝑄1 + 𝑄2.
𝑄1 𝑎𝑛𝑑 𝑄2 Are amount of the good produced by a firm in country 1 and country 2
respectively? The cost functions are 𝑇𝐶1 = 𝐹 + 𝑐𝑄1 and 𝑇𝐶2 = 𝐹 + 𝑐𝑄2 for the firm in
country 1 and 2 respectively. F is fixed cost and c is marginal cost. Derive equilibrium Price
and quantities.
6. Suppose that a firm`s fixed total cost of production is birr 6000. And the variable cost is birr
30 per unit output. The revenue of the firm is birr 50 per unit output. What will be the
quantity of the good the firm should produce to break even?
1
7. Suppose that the demand curve facing a monopolist is given as 𝑄 = 20 − 2 𝑃 and its cost
1
function is 𝑇𝐶 = 2 𝑄 2 − 2𝑄 + 10.

a. What is the level of output that should be produced by the monopolist in order to
maximize its profit if it doesn`t apply any form of price discrimination? Find the total
revenue of the monopolist.
b. Determine the total revenue of the monopolist if it applies first degree price
discrimination.
8. Suppose a monopolist faces a demand curve with constant price elasticity of -2 and that the
monopolist's marginal costs equal birr 10 for all output levels. Determine the profit
maximizing output and the associated price the monopolist will charge.

NB:

-Members of a group should not be more than 5


-Every member should participate.
-Submission date: February 7, 2020.

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