# JNU SIS 2013

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## JNU SIS 2013

 can anyone please explain Q4. A monopolist has constant marginal costs at Re 1 per unit, and zero fixed costs. It faces the demand curve D(p) = { 100/p, p<=20             { 0, p>20           where p is the price What is the profit maximizing choice of output? a) 20 b) 5 c) 1/99 d) 10
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## Re: JNU SIS 2013

 Administrator Its simple, profits (as a function of q) for the above demand function can be written as: profits(q) ={ 100 - q if q >= 5,                  { 0 - q if q < 5 Clearly, the profit maximizing choice is q = 5 and therefore, p = 20.
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## Re: JNU SIS 2013

 In reply to this post by Kajol Hi Kajol! Here, you can't essentially use the MC and elasticity formula, since it comes to zero. I simply used the options to check for which of the output, the profit is maximum. Profit= P*Q-(MC*Q) , with option d, q=10, and consequently p=100/q=10 10*10-(1*10)=90 With option a, q=20 and price=100/20=5 100-(20*1)=80 With c, q=1/99, this would make p>20, and thereby quantity zero, which contradicts. With option b, p=20, q=5 20*5-(5*1)=95 Hence The answer is b.
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## Re: JNU SIS 2013

 In reply to this post by Amit Goyal Thank you Sir, this is a fool proof way of looking at such problems :)
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## Re: JNU SIS 2013

 Yes it's clear now. Thanks a lot Sir:) On May 9, 2016 3:38 PM, "SM [via Discussion forum]" <[hidden email]> wrote: Thank you Sir, this is a fool proof way of looking at such problems :) If you reply to this email, your message will be added to the discussion below: http://discussion-forum.2150183.n2.nabble.com/JNU-SIS-2013-tp7600543p7600548.html To start a new topic under General Discussions, email [hidden email] To unsubscribe from Discussion forum, click here. NAML
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## Re: JNU SIS 2013

 In reply to this post by SM And thank you SM :) On May 9, 2016 3:52 PM, "Kajol Dawar" <[hidden email]> wrote:Yes it's clear now. Thanks a lot Sir:) On May 9, 2016 3:38 PM, "SM [via Discussion forum]" <[hidden email]> wrote: Thank you Sir, this is a fool proof way of looking at such problems :) If you reply to this email, your message will be added to the discussion below: http://discussion-forum.2150183.n2.nabble.com/JNU-SIS-2013-tp7600543p7600548.html To start a new topic under General Discussions, email [hidden email] To unsubscribe from Discussion forum, click here. NAML