FIN 605 Week 4 Homework Help | Assignment Help | Kogod School Of Business American University
- kogod-school-of-business-american-university / FIN 605
- 12 Jul 2019
- Price: $15
- Other / Other
FIN 605 Week 4 Homework Help | Assignment Help | Kogod School Of Business American University
Homework 4 – Chapter 10
Exercises 1, 2, 4, 7, & 8
1. Will an increase in the demand for a monopolist’s product always result in a higher price? Explain. Will an increase in the supply facing a monopolist buyer always result in a lower price? Explain.
2. Caterpillar Tractor, one of the largest producers of farm machinery in the world, has hired you to advise them on pricing policy. One of the things the company would like to know is how much a 5 percent increase in price is likely to reduce sales. What would you need to know to help the company with this problem? Explain why these facts are important.
4. A firm faces the following average revenue (demand) curve:
P = 120 - 0.02Q
where Q is weekly production and P is price, measured in cents per unit. The firm’s cost function is given by C = 60Q + 25,000. Assume that the firm maximizes profits.
a. What is the level of production, price, and total profit per week
b. If the government decides to levy a tax of 14 cents per unit on this product, what will be the new level of production, price, and profit
7. Suppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of $40 per unit.
a. If the elasticity of demand for the product is –2, find the marginal cost of the last unit produced.
b. What is the firm’s percentage markup of price over marginal cost
c. Suppose that the average cost of the last unit produced is $15 and the fixed cost is $2000. Find the firm’s profit
8. A firm has two factories for which costs are given by
Factory #1: C1(Q1) = 10*Q12
Factory #2: C2(Q2) = 20*Q22
The firm faces the following demand curve P = 700 - 5Q
where Q is total output, i.e. Q = Q1 + Q2.
a. On a diagram, draw the marginal cost curves for the two factories, the average and marginal revenue curves, and the total marginal cost curve (i.e., the marginal cost of producing Q = Q1 + Q2). Indicate the profit-maximizing output for each factory, total output, and price.
b. Calculate the values of Q1, Q2, Q, and P that maximize profit.
c. Suppose labor costs increase in Factory 1 but not in Factory 2. How should the firm adjust the following(i.e., raise, lower, or leave unchanged): Output in Factory 1? Output in Factory 2? Total output? Price
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