Average Revenue, Marginal Revenue, and Marginal Cost
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Micro
1. . Monopoly producer has a total cost function C = 66 + 2Q + Q2 (Hint: MC = 2 + 2Q). Demand for its product is Q = 10 - 0.2P (Hint: MR = 10 - 0.4P).
a. Compute and graph Average Revenue, Marginal Revenue, and Marginal Cost.
b. What are the profit-maximizing output level, price, and profits?
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1. Two slumlords own rows of houses on opposite sides of the street. Each would gain if the other upgraded his own property, but neither wants to upgrade until the other does. Relate this situation to the Prisoner's Dilemma, and provide a table showing the situation of both landlords. Make up numerical examples as appropriate.
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Solution Summary
The expert determines the average revenue, marginal revenue, and marginal costs.
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1. Two slumlords own rows of houses on opposite sides of the street. Each would gain if the other upgraded his own property, but neither wants to upgrade until the other does. Relate this situation to the Prisoner's Dilemma, and provide a table showing the situation of both landlords. Make up numerical examples as appropriate.
In prisoner's dilemma case, both players may gain or lose depending on actions each chooses to take. The dominant strategy in this situation is not to upgrade.
Numerical example:
Suppose the two landlords are A and B. The cost of up-gradation ...
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