Assume that Lakamuun joint is a monopolist that produces plates of TZ at Konongo
has the following average cost functions
If the demand function is given by:
i. Set up the profit maximizing problem of the firm
ii. Compute the output-price combination that maximizes the profit of the firm
iii. What is the maximum profit
iv. Explain extensively if the firm should or should not continue product in the short run.
CHRISTIAN SERVICE UNIVERSITY COLLEGE KUMASI CSUC SCHOOL OF BUSINESS DEPARTMENT OF ACCOUNTING AND FINANCE BACHELOR OF BUSINESS ADMINISTRATION Mid Semester Examination, 2020/2021 Academic Year Level 300 60 MARKS CSBF 324: MANAGERIAL ECONOMICS APRIL, 2020 DURATION: 7 DAYS ___________________________________________________________________________ INSTRUCTIONS: ANSWER ALL QUESTIONS. ANSWERS SHOULD BE TYPED and submitted to
[email protected] SUBMISSION DATE; LATEST BY MID NIGHT 6 TH APRIL, 2020 CAUTION The email address will cease to exist at 12 midnight 6 th April, 2020. ALL ASSIGNMENTS SUBMITTED AFTER THE SUBMISSION DATE WILL NOT BE CONSIDERED Question One (A). The short-run total cost function of a firm that employs labour (L) and fixed capital is given by Where is the cost of the labour and is the cost of capital i. Derived the marginal cost of the firm ii. Assuming that the firm is a price taking one that sells its output at per unit, derive the short-run supply function of the firm iii. If there are 200 firms in the industry with similar cost conditions, compute the total market supply. (B) Assume that Lakamuun joint is a monopolist that produces plates of TZ at Konongo has the following average cost functions If the demand function is given by: i. Set up the profit maximizing problem of the firm ii. Compute the output-price combination that maximizes the profit of the firm iii. What is the maximum profit iv. Explain extensively if the firm should or should not continue product in the short run. Question Two (A) Suppose a monopoly firm can produce any level of output it wishes at constant marginal (and average) cost of GH¢5 per unit. Assume the monopoly sells its goods in two different markets separated by some distance. The demand curve in the first market is given by The demand function in the second market is given by i. If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this situation? ii. Assume that the monopolists follows the two-part tariffs pricing policy , what is the maximum entry fee that must be charged? iii. How much profit will the firm make? (B) A monopolist has the cost function i. If the demand curve is given by , compute the price-output combination that minimizes profits. Also, calculate total profits at this price-output combination. ii. Assume that it becomes possible to sell in a separate second market with demand determined by , calculate the prices which will be set in the two markets and the change in total output and profits from case ii. iii. Now suppose the firm still has access to both markets, but is prevented from discriminating between them. What will be the result? Osei-Anim Reindolph (MPhil, Msc, MBA, EMBA, CH.FE, Bsc, Dip Edu, Adv. Dip Pm, Dip BKF, Adv Dip BKF)