Economics Assignment

Running Head: ECONOMICS. 1
ENGM 9011 Assignment 3.
Name:
Institution:
Date:

ECONOMICS. 2
Economics Assignment.
1. A Monopolist operates in a home and foreign market with demand functions:
a. For home market QH =90−1
2 pH
For foreign market QF =30−1
4 pF
The Total Cost is represented by C=500+40 Q
Where Total output = Q=QH + QF
i. Find the overall demand function for the market.
Q=QH + QF
=90−1
2 p+ 30−1
4 p
=90+30−1
2 p−1
4 p
=120−3
4 p
ii. Determine the monopolist’s profit-maximizing quantity and price (Spulber, 2019).
Maximizing profit will occur where the MR = MC
Q=120−3
4 p
3
4 p=120−Q
p=120( 4
3 )−Q( 4
3 )
p=160−4
3Q
TR=P×Q
TR= ( 160−4
3 Q ) Q
TR=160 Q−4
3 Q2
MR=ΔTR
ΔQ
=160−2( 4
3)Q
=160−8
3 Q

ECONOMICS. 3
8
3 Q=160
Q=160×3
8
Q=60 Quantity
p=160−4
3Q
p=160−4
3 ( 60 )
p=160−80
p=80 Price
b. Monopolist charging different markets prices.
i. Home market and foreign market demand function is:
QH =90−1
2 pH
1
2 pH =90−QH
pH =180−2 QH
TR=P×Q
TR= ( 180−2 QH ) Q
TR=180 Q−2QH 2
MR=Δ TR
ΔQ
=180−2( 2) QH
¿ 180−4 Q
4 Q=180
Q=180×1
4
QH =45 Quantity
pH =180−2 QH
pH =180−2 ( 45 )
pH =90 PRICE

ECONOMICS. 4
QF =30−1
4 pF
1
4 pF=30−QF
pF =(30−QF )4
pF =120−4 QF
TR=P×Q
TR= ( 120−4 QF ) Q
TR= ( 120 Q−4 Q2F )
TR=120 Q−4 Q
2
F
MR=Δ TR
ΔQ
=120−2(4 )QF
¿ 120−8 Q
8 Q=120
Q=120×1
8
QF =15 Quantity
pF =120−4 QF
pF =120−4 ( 15 )
pF =60 PRICE
ii. Calculate the price elasticity (Amlung, et al., 2019).
η= [ ( Q1−Q0 ) ÷ ( Q1+Q0 ) ]
[ ( P1−P0 ) ÷ ( P1+ P0 ) ]
Where η is the elasticity of demand
Q1 is quantity in foreign market
Q0 is quantity in home market
P1 is price in foreign market
P0 is price in home market