Economics Study Questions: Need Help Please!?

[Nara31]

Study prep questions for Microeconomics would appreciate any help in how to best calculate the following 3 questions:

Q1) Firm A has a monopoly in the local market. The demand is:

QD = 100- 2P --> P = 50- 1/2Q
The resulting marginal revenue function is MR(Q) = 50-Q
The firm's marginal cost of production is MC(Q)= 5+1/2Q.
a) Calculate the firm's profit maximizing output.
b) What are the social costs of monopoly power? Calculate the social cost.

(Q2) Firm A's production function is:
Q = 5LK,

Where Q = output, L = labour measured in person hours, and K = capital measured in machine hours. The firm's labour cost is $20 per hour, while the firm uses $80 per hour as an implicit machine rental charge per hour. The firm's current budget is $64,000 per month to pay labor and capital.

(Q3) - Consider a competitive market in which the market demand for the product is expressed as:
P=75-1.5Q,
and the supply of the product is expressed as:
P = 25 + 0.50Q.

Price, P, is in dollars per unit sold, and Q represents rate of production and sales 10
hundreds of units per day. The typical firm in this market has a marginal cost of:
MC = 2.5 + 10Q.

a) Determine the equilibrium market price and rate of sales.

b) Determine the rate of sales of the typical firm, given your answer to
part a) above. for the typical firm?


** Thankyou **
Q2 questions-
a) Given the information above, determine firm A's optimal capital/labor ratio.

b) Set up and explain the constrained maximisation problem using the information given above.

 

[chris w]

1
A. Set MC = MR
B. A monopoly is going to produce less and charge more. Production amount is determined by MC=MR and price is determined by demand curve. In perfect competion MR would equal P. Find out what P is in perfect competition and compare it to what P is under the monopoly. Compare P and Q perfect competition and P and Q monopoly. You could draw graphs and show the changes in consumer/producer surplus.

2. EDIT: Actually I dont really remember how to do this. I think you set MPL/MPK = priceK/Price L or something like that. You end up solving for one variable in terms of the other. Then I believe you plug your answer into the constraint equation which is total amount of money you can spend = L(cost L) + K(cost K).

3. A. Set demand equal to supply and solve for Q. Use that Q and plug it into either the demand or supply equation to find equilibrium P.
B. Once again, competetive market means MR = P. You know what P is now so set MC = P.