# Eco- suppose a monopolist faces the following demand curve

1.  (30 points) Suppose a monopolist faces the following demand curve:

P = 596 – 6Q.  If the long run marginal cost of production is constant and equal to \$20.

a) (5 points) What is the monopolist’s profit maximizing level of output?

b) (5 points) What price will the profit maximizing monopolist charge?

c) (5 points) How much profit will the monopolist make if she maximizes her profit?

d) (5 points) What would be the value of consumer surplus if the market were perfectly competitive?

e) (5 points) What is the value of the deadweight loss when the market is a monopoly?

f) (5 points) What is the value of the Lerner Index for this monopoly?

2.  (30 points) Suppose there are two firms in a market who each simultaneously choose a quantity.  Firm 1’s quantity is q1, and firm 2’s quantity is q2.  Therefore the market quantity is Q = q1 + q2.  The market demand curve is given by P = 100 – 4Q.  Also, each firm has constant marginal cost equal to 28.  There are no fixed costs.

The marginal revenue of the two firms are given by:

·           MR1 = 100 – 8q1 – 4q2

·           MR2 = 100 – 4q1 – 8q2.

A) (6 points) How much output will each firm produce in the Cournot equilibrium?

B) (6 points)What will be the market price of the good?

C) (6 points) What is the deadweight loss that results from this duopoly?

D) (6 points) How much profit does each firm make?

E) (6 points) Suppose Firm 2 produced 10 units of output.  How much output should Firm 1 produce in order to maximize profit? (Hint: Use Firm 1’s Reaction Function)

3.  (28 total points) Suppose that two players are playing the following game.  Player 1 can choose either Top or Bottom, and Player 2 can choose either Left or Right.  The payoffs are given in the following table:

 Player 2 Player 1 Left Right Top 6            5 9              4 Bottom 7            4 5              3

where the number on the left is the payoff to Player A, and the number on the right is the payoff to Player B.

A) (4 points) Does player 1 have a dominant strategy, and if so what is it?

B) (4 points) Does player 2 have a dominant strategy and if so what is it?

C) (2 point each) For each of the following strategy combinations, write TRUE if it is a Nash Equilibrium, and FALSE if it is not:

i)  Top/Left

ii) Top/Right

iii) Bottom/Left

iv) Bottom Right

D) (4 points) What is Player 1’s maximin strategy?

E) (4 points) What is player 2’s maximin strategy?

F) (4 points) If the game were played with Player 1 moving first and player 2 moving second, using the backward induction method discussed in the class notes, what strategy will each player choose?

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.