Question 1 A monopolist faces the demand curve Q=500-5p, where Q is the output of the firm and p the price. The monopolist has fixed costs FC=100. fixed cost and his average variable cost is 10 at all levels of output.

(a)

Specify the firm's revenue and profit as a function of output.

(b)

Find the profit maximizing choice of output.

Question 2 A monopolist fact a price elasticity of demand of -1.2. The marginal cost is 2. What price should the monoplist charge?

Question 3A monopolist sells in two markets. The inverse demand curve for her product is p₁=1000-Q₁ in the first market and p₂=500-2Q₂ in the second market, where Q_i is the quantity sold in market i and p_i is the price charged in market i. She has a constant marginal cost of production of 100, and fixed costs are given by FC=100,000. Assume that the firm can charge different prices in the two markets. What is the profit maximizing combination of prices for this monopolist? What is the profit?

Question 4 Solve Question 24.5 in the workbook.