Please solve problem set 9 economics make sure it’s 100% correct, attached beow is the documentDue Friday, November 13th, 2020
Problem Set 9
Instructions: Please write your answers on a separate sheet of paper, showing all necessary work. Upload a
single PDF to the assignments folder in Brightspace. The problem set is worth a total of 10 points – 5 for
completion and 5 for correctness of one (or more) question(s) selected by me.
1. Assume that a monopolist sells a product with a total cost function: = 1,200 + 0.5 2 . The
market demand curve is given by the equation: = 300 − .
a. Graph this market. Find and label the profit-maximizing output and price for this monopolist.
b. Calculate profit.
c. Calculate the price elasticity of demand at the monopolist’s profit-maximizing output. Verify
that the IEPR holds.
d. If this market were supplied by many firms with the same cost function, how much would be
produced and at what quantity would it be sold?
e. Calculate the loss in efficiency in this market due to the monopoly.
2. Suppose a monopolist has a demand function given by: = 10,000 ∙ −2 .
a. Calculate the MR function for this firm.
b. Assume that MC is constant and equal to $25, find the profit maximizing price and quantity.
c. Calculate the price elasticity of demand at the monopolist’s profit-maximizing output. Verify
that the IEPR holds.
3. Sally sells SoyNut MagicButterTM by the case. The cost of production is given by: = 1000 + 30 .
2
The market demand curve in Los Angeles is given by the equation: = 80 − .
3
a. If Sally sets one price for the Los Angeles market, how much profit will she earn?
b. If Sally can perfectly price discriminate, how much profit will she earn?
c. Now suppose that the firm expands, and begins selling SoyNut MagicButterTM in Riverside,
1
where demand is = 50 − . If Sally must set the same price in both markets, what price
3
will she set? How much profit will she earn?
d. If the firm can charge different prices in each market, what prices will it set? How much profit
will it earn?
e. Comparing your answers in parts (c) and (d), in which situation is Sally better off? In terms of
consumer surplus, which situation do people in LA prefer? What about people in Riverside?

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