1. A monopolist firm faces a demand with constant elasticity of -4.0. It has a constant marginal cost of $30 per unit and sets a price to maximize profit. If marginal cost increases by 10 percent, would the price charged also rise by 10 percent?

2. 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. What is the level of production, price, and total profit per week? Hint: MC=60.

3. A firm has two factories for which costs are given by:

Factory #1: C1 (Q1 ) = 10Q 2 above Q and 1 Below Q

Factory # 2: C2 (Q2) = 20Q 2 above Q 1 Below Q

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.