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Author Question: A monopolist's demand curve is given by: p = 100 + A1/2 Q where Q is the quantity of output and ... (Read 19 times)

joesmith1212

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on: Jul 1, 2018
A monopolist's demand curve is given by:
 
  p = 100 + A1/2  Q
  where Q is the quantity of output and A is the quantity of advertising. Suppose the cost of advertising and output is given by:
   C(Q,A) = 10Q + A
  Determine the profit maximizing quantity of output and advertising.

Question 2

Which of the following cost relationships is not true?
 
  A) AFC = AC - MC
  B) TVC = TC - TFC
  C) The change in TVC/the change in Q = MC
  D) The change in TC/ the change in Q = MC


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bassamabas

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Reply #1 on: Jul 1, 2018
Answer to Question 1

The monopolist maximizes profit
Profit = (100 + A1/2  Q)Q  10Q + A
The first order conditions are:
dProfit/dQ = 100  2Q  10 = 0
dProfit/dA = .5A-1/2Q  1 = 0
Solve the first condition to find Q= 45. Use this to solve the second conditions for A = 506.

Answer to Question 2

A


joesmith1212

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Reply 2 on: Jul 1, 2018
Thanks for the timely response, appreciate it

bbburns21

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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