Economics
101
Fall 2001
Answers for Practice Problems #7
1. (c)
2. (c)
3. (a)
4. (a)
5. (b)
6. (b)
7. (a) The profit-maximizing condition is MR=MC.
50-2Q=10 and thus Q = 20 (units).
(b) From the demand curve, P = 50-Q = 50-20 = $30.
(c) The monopolist’s profit is that TR-TC = (30*20)-(10*20) = $400.
(d) By equating the MR and the MC, the profit-maximizing output level is 20 units.
(e) From the demand curve, P = 50-Q = 50-20 = $30.
(f) The monopolist’s profit is that
TR-TC = (30*20)-200 = $400.
8. (a) By equating the MR and the MC, 10-(QB/250) = 5.
Thus, the profit-maximizing output level is 1250 gallons.
(b) Similarly, 95-2QS = 5. Thus, the profit-maximizing output level is 45 gallons.
(c) No.
(d) The profit-maximizing prices in each market are PB = 10-(1250/500) = $7.50 and PS = 95-45 = $50. Thus, Apex should sell its paint to the bathroom painters at a price of $7.50 per gallon and at a price of $50 per gallon to the model boat builders.