1. If a monopoly's inverse demand curve is p(Q) = 18-2Q and its cost function is C(Q) = 10 +3Q + 0.5Q2, what Q* maximizes the monopoly's profit (or minimizes its loss)? At Q*, what is the price and the profit? Should the monopoly operate or shut down?

2. Suppose that the inverse demand for San Francisco cable car rides is p = 10 - Q/1000, where p is the price per ride and Q is the number of rides per day. Suppose the objective of San Francisco's Municipal Authority (the cable car operator) is to maximize its revenues. What is the revenue maximizing price? Suppose that San Francisco calculates that the city's businesses benefit from tourists and residents riding on the city's cable cars at $4 per ride. If the city's objective is to maximize the sum of cable car revenue and the economic impact, what is the optimal price?

3. When the iPod was introduced, Apple's constant marginal cost of producing its top-of-the-line iPod was $200 (iSuppli), its fixed cost was approximately $736 million, and I estimate that its inverse demand function was p = 600 - 25Q, where Q is units measured in millions. What was Apple's average cost function? Assuming that Apple was maximizing short-run monopoly profit, what was its marginal revenue function? What were its profit-maximizing price and quantity, profit, and Lerner Index? What was the elasticity of demand at the profit-maximizing level? Show Apple's profit-maximizing solution in a figure.

4. Discuss the impact of a direct tax on monopoly. Using appropriate model, show that the consumers could be born with more than 100% tax burden if the government impose a direct tax on monopoly.