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Monopoly
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EconModelExerciseswww.econmodel.com/classic/ Monopoly Introduction Themostbasicmodelofprofitmaximizingbehaviorbyafirmassumesthatthefirmisa pricetaker.Thatmeansthatthefirmcansellanyquanityatthemarketprice,butthe firm 9schoiceofquanitytosupplyhasnoeffectonthatmarketprice. Amoregeneralapproachistoassumethatthefirmfacesadownwardslopingdemand curvebecauseit 9schoiceofquantitytosupplydoesaffectthemarketprice.Thisisa centralcharacteristicofamonopolist,butfirmsthatfaceadownwardslopingdemand curvecanalsobeinmarketswithalimitednumberofcompetitorsormonopolistic competition.Anexampleofthelattermightbeafirmsellingabrandedproductwhere bothproductpriceandbrandloyaltyinfluencepurchasingdecisions. TheModel Thefirm 9saveragecostfunctionis AC=15+2Weather-2Q+0.10Q 2 Thefirmfacesthedemandcurve Q=10-1.0P0.2P[-1]+0.10Income Exercises 1.Drawtheaveragecost(AC)andmarginalcost(MC)curves.
2.Drawthedemandcurveandthemarginalrevenue(MR)curve. 3.Showthatproducing7.96unitsmaximizesprofits. 4.Changethevalueoftheweathervariable.Determinewhateffectthathasonthe profitmaximizingquantity.
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- Username: sgcm
- Subcategory: Home > Gaming > Board Games 0
- Added: 23:53 ← 12 Oct 2010
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