Imagine that the perfectly competitive market described in Chapter 7, Problem S1, was transformed into a pure
Question:
Imagine that the perfectly competitive market described in Chapter 7, Problem S1, was transformed into a pure monopoly. (What were formerly independent small firms are now production units owned by the monopolist.) The cost structure of the typical unit continues to be given by C = 25 + Q2 − 4Q, and industry demand is: Q = 400 − 20P or, equivalently, P = 20 − .05Q. Currently, the monopolist has 30 production facilities in place.
a. Create a spreadsheet similar to the example shown. Enter numerical values for cells B14 and C8; all other cells should be linked by formulas to these two cells.
b. In the short run, the monopolist can change output level QF but cannot vary the number of production facilities. Use the spreadsheet optimizer to maximize the firm’s short-run profit.
c. In the long run, the monopolist can change output levels QF and the number of production facilities. Use the spreadsheet optimizer to maximize the firm’s long-run profit.
Step by Step Answer:
Managerial Economics
ISBN: 978-1118808948
8th edition
Authors: William F. Samuelson, Stephen G. Marks