Managerial Economics Middleton Problem Set #5

• Chapter 8, problem #1
• You are the manager of a monopoly, and your demand and cost functions are given by P = 300 –
  • At what price and quantity are firm’s profits maximized?
  • What are profits given the price and quantity you found in part a?
  • What is the own price elasticity of demand at the profit-maximizing price and quantity combination?Is demand inelastic, elastic, or unit elastic?
  • At what price and quantity are the firm’s revenues maximized?
  • Calculate the maximum revenues (given what you found in part d).
  • What is the own price elasticity of demand at the revenue-maximizing price and quantity combination?Is demand inelastic, elastic, or unit elastic?
• Chapter 8, problem #5
• Chapter 8, problem #7
• You are the manager of a firm which produces according to the cost function C(Q) = 75+5Q².Determine the profit maximizing output and price and the level of profits.Discuss what (if anything) will happen to profits in the long run, if:
  • You are in a perfectly competitive market and price other firms charge is $25.
  • You are a monopolist and inverse demand for your product is given by P = 250-2.5Q.
  • You are in a monopolistically competitive market and inverse demand for your product is given by P = 250 – 2.5Q.
• Chapter 8, problem #15

2.5Q and C(Q)=1000 + 2.5Q².