 QUESTION 6A

P= 800 – 20Q
TC = 300 + 500Q + 10Q^2
==>Revenue=P*Q
==>Revenue=Q(800-20Q)=800Q-20(Q^2)
==> Marginal revenue=800-40Q

Now, TC=300 + 500Q + 10Q^2
==>Marginal Cost = 500+20Q

For monopolist MC=MR
==>500+20Q=800-40Q
==>60Q=300
==>Q=5

at Q=5 , P will be 800-20(5)=700
Profit =Revenue-Total Cost
==>profit={800Q-20(Q^2)}-{300 + 500Q + 10Q^2}
putting Q=5,we get
profit=3500-3050=450

Therefore, Profit maximizing Price=700 and Profit maximizing output is 5 millions of pounds of plastic.

QUESTION 6C

Given p = \$ 620

Total revenue = 620Q

MR = 620 ,

Now, MR = MC

620 = 500 + 20Q

Therefore, Q = 6 units.

p = \$ 620

QUESTION 9

First option is economically good for government and firm. It is efficient in reducing pollution, and it will have long term impact.

Second option is economically not good for government and firm because some pollution will occur if there is an industry. Therefore, one has to close the firm in order to eliminate pollution.

Third option is not economically good for government. It is not efficient in reducing production because tax incentives may be not enouhg for companies to decrease pollution, and it will not have long term impact.

QUESTION 4

If patent protection is unavailable, then the firm in a monopoly has to compare these incentives to a firm in a competitive market.

• In a competitive market, each new idea could be replicated easily by the followers as patent protection is unavailable and thus, innovation is discouraged.
• For a firm in a competitive market innovation would lead to greater efficiency and much larger profit margins than previously.
• In a monopoly, the firm can charge whatever prices, which enables it to innovate and cost the customers accordingly.
• The high profits earned can go back into the Research and Development to make further breakthroughs.

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