Question 1 An industry is described by the following demand and supply functions. D_p=1,200Q, S2p=Q a) What is the market price and output level in

Question 1

An industry is described by the following demand and supply functions.

D_p=1,200—Q, S2p=Q

a) What is the market price and output level in the industry?

b) What is the market price and output level when a firm purchases the sales

right of all the others, and thus becoming a monopolist?

Question 2

You are the COO at PineApple, a company that produces notebook computers for business

people. The company has just developed a new model — Pbook. For production of Pbook, the

company is considering production at all or some of the following plants.

Plant 1

Plant 2

Plant 3

Average Total Costs (ATC)

ATC1=1/2Q1

ATC2=1/4Q2

ATC3=1/4Q3

As the COO, you need to find out how to allocate the production.

a) What are the marginal costs of plant 1, plant 2, and plant 3?

b) How would you allocate the production of Pbook’? What % of total outputs

should be produced at plant 1, plant 2, and plant 3?

c) One of your subordinates argues that either plant 2 or plant 3 does not need to

be used as they have exactly same cost structure. Do you agree? Explain.

d) Your marketing manager reported that that the estimated market price of the

new product is P = $2,000. How many units are you going to produce in total?

 
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