Q1- Suppose you are the manager of a watchmaking firm operating in a competitive market. Your

cost of production is given byC2002q2, whereqis the level of output andCis total cost. (The marginal cost of production is 4q; the fixed cost is $200.)

1. If the price of watches is $100, how many watches should you produce to maximize profit?
2. What will the profit level be?
3. At what minimum price will the firm produce a positive output?

Q2- a. A monopolist is producing at a point at which marginal cost exceeds marginal revenue. How should it adjust its output to increase profit?

b. Why might a firm have monopoly power even if it is not the only producer in the market?

c. What are some of the different types of barriers to entry that give rise to monopoly power? Give an example of each.