Chapter 9

Suppose chocolate-covered prunes have a demand curve that can be expressed as Q = 80 - P and the monopolist that produces them has a total cost curve of TC = 6Q²,whereQis output.

a. Solve for the profit-maximizing level of output using calculus.

b. What price will the producer charge to maximize its profits?

Chapter 11

The inverse demand for tacos is given byP= 10 - 0.02Q, wherePis the price per taco andQis the total number of tacos brought to market. There are two taco shops in the market. Shop 1's cost function is given byC1=0.01q1², whereq1is the number of tacos it brings to market. Shop 2's cost function is given byC2=0.01q2², whereq2is the number of tacos it brings to market. Given that the two shops compete by setting output (Cournot), answer the following.

a. Identify shop 1's reaction function to firm 2's output.

b. Identify shop 2's reaction function to firm 1's output.

c. Identify the equilibrium output level of each shop and the equilibrium price for tacos.