Dalahla Company Limited, focusing on producing tooth paste (in units) has a demand function 4 = 35 0.5. If total fixed cost is $80 and average variable cost per unit function is 3

, where Q is number of tooth paste produced and P is the price per tooth paste (in $). What is the total profit at the profit maximizing level of output, and what is the best pricing policy

option?

A.You have been appointed the new manager for Ghana Airways Company Limited, an international airline company that flies from the Kotoka International Airport in Accra to Heathrow Airport in London every day. The airline is described as a monopolist and has the possibility of discriminating between its Business and Economy Travelers. To help you price your services appropriately to maximize profit, you engaged an economist who estimated the demand function for both Economy and Business Travelers as:

Q₁ = 24 - 0.2P₁Economy Travelers

Q₂ = 10 - 0.05P₂Business Travelers

Where Q₁ and Q₂ are the respective numbers of Economy and Business Travelers and P₁ and P₂ are their respective fares (in GH). If the Total Cost (TC) of this airline company for flying these two categories of travelers is given as TC = 35 + 40Q, where Q = Q₁ + Q₂

What can you say about the fares, number of travelers and profit of Ghana Airways Company Limited, with and without discrimination?

ii.In April 2007, there were shortages of Ghacem cement in the country which led to a rise in the price of Ghacem cement. The government then intended to put a price ceiling on cement in the country to minimize the loss to users of cement for construction purposes.

Some people were of the view that "the fixing of a price ceiling for cement in the country will not have any effect". Briefly discuss with the aid of an appropriate diagram the effect of the imposition of price ceiling on Ghacem cement market.

After the imposition of the price ceiling (and initial market equilibrium), two events took place in the cement market. First, Ghacem Company Limited obtained an efficient technology of production which influenced supply of Ghacem cement. This was followed by the second event (after a year) where the prices of raw materials for Ghacem cement production increased. An economist trained in the University of Professional Studies, Accra is of the view that, the final equilibrium price, after the effect of the second event has been felt, can only be lower than the initial equilibrium price (that is when the two events have not occurred). Another economist trained in the University of Havard, however on the other hand thinks the final equilibrium price can only be higher than the initial equilibrium price. By using appropriate diagram(s) briefly explain who is right. If none of the two economists is right, what is your view