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    This Study Resource Was: Tutorial 7

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    lana del rey
    This document appears to be tutorial solutions from August 2nd, 2017. It includes solutions to three problems/questions: 1. The first problem is not shown. 2. The second problem asks to express a firm's marginal revenue as a function of its price, given an elasticity of demand of -3 and constant marginal costs of $20. 3. The third problem asks to calculate the profit-maximizing price for a monopoly with a demand elasticity of -3 and marginal costs of $20. The solution shows the profit-maximizing price is $30.

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    This Study Resource Was: Tutorial 7

    Uploaded by

    lana del rey
    20 views4 pages
    This document appears to be tutorial solutions from August 2nd, 2017. It includes solutions to three problems/questions: 1. The first problem is not shown. 2. The second problem asks to express a firm's marginal revenue as a function of its price, given an elasticity of demand of -3 and constant marginal costs of $20. 3. The third problem asks to calculate the profit-maximizing price for a monopoly with a demand elasticity of -3 and marginal costs of $20. The solution shows the profit-maximizing price is $30.

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    Solutions_Tutorial_7.pdf

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    This document appears to be tutorial solutions from August 2nd, 2017. It includes solutions to three problems/questions: 1. The first problem is not shown. 2. The second problem asks to express a firm's marginal revenue as a function of its price, given an elasticity of demand of -3 and constant marginal costs of $20. 3. The third problem asks to calculate the profit-maximizing price for a monopoly with a demand elasticity of -3 and marginal costs of $20. The solution shows the profit-maximizing price is $30.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    20 views4 pages

    This Study Resource Was: Tutorial 7

    Uploaded by

    lana del rey
    This document appears to be tutorial solutions from August 2nd, 2017. It includes solutions to three problems/questions: 1. The first problem is not shown. 2. The second problem asks to express a firm's marginal revenue as a function of its price, given an elasticity of demand of -3 and constant marginal costs of $20. 3. The third problem asks to calculate the profit-maximizing price for a monopoly with a demand elasticity of -3 and marginal costs of $20. The solution shows the profit-maximizing price is $30.

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    © All Rights Reserved
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    of 4

    Tutorial 7

    August 2nd, 2017

    1.

    m
    er as
    co
    eH w
    o.
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    aC s
    vi y re
    ed d
    ar stu
    is
    Th
    sh

    This study source was downloaded by 100000808893103 from CourseHero.com on 11-15-2021 04:48:55 GMT -06:00

    https://www.coursehero.com/file/32131247/Solutions-Tutorial-7pdf/
    2.

    m
    er as
    co
    eH w
    o.
    rs e
    ou urc
    o
    aC s
    vi y re
    ed d
    ar stu
    is
    Th
    sh

    This study source was downloaded by 100000808893103 from CourseHero.com on 11-15-2021 04:48:55 GMT -06:00

    https://www.coursehero.com/file/32131247/Solutions-Tutorial-7pdf/
    m
    er as
    co
    eH w
    o.
    rs e
    ou urc
    3.
    o
    aC s
    vi y re
    ed d
    ar stu
    is
    Th
    sh

    This study source was downloaded by 100000808893103 from CourseHero.com on 11-15-2021 04:48:55 GMT -06:00

    https://www.coursehero.com/file/32131247/Solutions-Tutorial-7pdf/
    m
    er as
    co
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    o.
    rs e
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    o
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    4. The manager of a local monopoly estimates that the elasticity of demand for its product is
    constant and equal to -3. The firm’s marginal cost is constant at $20 per unit.
    ed d

    a. Express the firm’s marginal revenue as a function of its price.


    b. Determine the profit maximizing price.
    ar stu

    Solution:

    a. Based on a price elasticity of demand of -3, the monopolist’s marginal revenue is


    is

    1−3 2
    𝑀𝑅 = 𝑃 ( −3 ) = 3 ×𝑃.
    Th

    b. Since the monopolist maximizes profits where MR = MC, the profit-maximizing price
    can be obtained by solving the following equation: (2/3) × P = 20, so P = $30.
    sh

    This study source was downloaded by 100000808893103 from CourseHero.com on 11-15-2021 04:48:55 GMT -06:00

    https://www.coursehero.com/file/32131247/Solutions-Tutorial-7pdf/
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