A demand curve is given by the following equation:
a) Find two points on the demand curve
b) Calculate the Total Revenue from each point
c) Calculate the elasticity between the two points
Explain why the relation between the numbers in (b) and (c) makes sense. (1 point)
A firm is a monopolist and faces the following demand:
q P q P
0 148 5 88
1 136 6 76
2 124 7 64
3 112 8 52
4 100 9 40
a) It appears the consumers will continue to pay a positive price if the quantity is greater than 9. Explain why the monopolist will never produce a quantity above 9 no matter what the costs are.
b) For the same demand and the costs given below, find where a profit maximizing monopolist with the demand above will produce and find the profit. Draw a picture of the demand, MR, MC and ATC of the monopolist assuming the good can be produced in continuous quantities. Represent the profit of the monopolist in that graph.
q TC ($) q TC ($)
1 96 6 155
2 105 7 175
3 115 8 200
4 126 9 232