 # Marginal Cost and Demand Curve

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4178 Words Grammar Plagiarism  Writing  Score Marginal Cost and Demand Curve Economics 101
Summer 2012
Due 6/20/12

Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Late homework will not be accepted so make plans ahead of time. Please show your work. Good luck!
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1. Consider a monopolist where the market demand curve for the produce is given by P = 520 – 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50.
a. Given the above information, what is this monopolist’s profit maximizing price and output if it charges a single price?

MR = 520 – 4Q
MC = 100 + 2Q
520 – 4Q = 100 + 2Q
Q = 70 units of output
P = 520 – 2Q = 520 – 2(70) = \$380 per unit of output

b. Given the above information, calculate this single price monopolist’s profit.

Profit = TR – TC
TR = P*Q = (\$380 per unit)(70 units) = \$26,600
TC = 100Q + Q2 + 50 = 100(70) + (70)(70) + 50 = \$11,950
Profit = \$14650

c. At the profit maximizing quantity, what is this monopolist’s average total cost of production (ATC)?

To answer this question we first need to write an expression for ATC.
ATC = TC/Q = 100 + Q + (50/Q)
Then replace Q with 70 to find the average total cost of producing 70 units of output.
ATC= 100 + 70 + (50/70) = \$170.71 per unit

d. At the profit maximizing quantity, what is the profit per

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