Economics of Enterprise Answers

a) The demand curve faced by monopolist and his total cost functions are given below; Demand function; Q = 3000 – 60P Total Cost function; TC = 100 +5Q+1/480Q2 a) Find profit Maximizing price and output level of this Monopoly firm.

b) Measure the firm profit margin at profit maximize output level.

c) “Compare to perfect competitive producer, the monopolist is misused scare resources” Explain using suitable grapes

Suppose the inverse demand for a monopolist’s product is given by P = 70-0.5Q. The monopolist can produce output in two plants. The marginal cost of producing in plant 1 is MC1 = 3Q1 and the marginal cost of producing in plant 2 is MC2 = Q2. How much output should be produced in each plat to maximize profit? And what price should be charged? Compare to perfect competition, monopolist charged higher price and supply less quantity with long run firm equilibrium. Discuss using suitable graph. Explain the deadweight loss of monopolization

“The Cobb-Douglas production function is widely used in managerial economic and empirical analysis because it possesses several useful mathematical properties” As a manager of an organization, how you could apply Cobb-Douglas production function for decision making?  

 Mr. Kamal is an owner of the communication center at Y junction and uses four word processors and two typewriters to produce reports. The marginal product of a typewriter is 50 pages per day, and the marginal product of a word processor is 500 pages per day. The rental price of a typewriter is Rs.1 per day, whereas the rental price of a word processor is Rs.50 per day. Is Mr. Kamal utilizing type writers and word processors in a costminimizing manner? Which service process is more profitable? Type writer or word processing? Justify your answer

Suppose the own price elasticity of demand for good X is 2, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 6. Determine how much the consumption of this good will change if: (a) The price of good X increased by 5 percent, (b) the price of good Y increase by 10 percent, (c) Advertising decreases by 2 present, (d) income falls by 3 percent.

you are given demand and supply schedule o burgers. where px is the price of a burger in rupees , QDX is the quantity demand and QSX is the quantity supplied.

px 100 200 300 400

QDX 1100 900 700 500

QSX 50 250 450 650

1. CALCULATE DEMAND AND SUPPLY FUNCTION

When the price of a product increases by 5% and the quantity demanded of the product changes from 1 500 to 1 200, what is the price elasticity of demand of the product? (Ignore the negative sign and round off to 2 decimal places)

The Extraordinary Manufacturing Company has established that the relationship between sales price for one of its products and the quantity sold per month is approximately 3D=1680-39p units. The fixed cost is P1500 per month, the variable cost is P45 per unit produced.

• What number of units should be produced and sold per month to maximize net profit? What is the maximum profit?
• What is the production range of profitable business for the company?

Which industry is most likely to be operated as a monopoly and why?