24 Jul WHAT IS THE PROFIT-MAXIMIZING PRICE?
Producers band together to form a cartel instead of competing agaisnt each other creatign amrket po Show more Producers band together to form a cartel instead of competing agaisnt each other creatign amrket power ( they now act like monopolists). Firms now face the downward sloping demand function: Q= 50-0.5P a) What is the Marginal Revenue function that corresponds to this demand function? b) Assuming a constant Marginal Cost of $20 what is the output quantity that maximizes profit? c) What is the profit-maximizing price? d) What is the markup or Lerner index? e) Explain why marginal revenue is lower than market price for a firm with market power. F) China has now become more competitive and the demand curve more elsastic. Provide both a qualitative and graphical explanation for why the cartel can no longer raise prices as much G) The cartel now wants to price discrimiante between poor Bangladeshis and rich Americans. What is the optimal markup and price to charge Bangladeshis is their price elasticity of demand is three times that of Americans? Show less
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