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

Question 2

You are the CeO at PineApple, a company that produces notebook computers for businesspeople. 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

1Plant

2 Plant

3 Average Total Costs (ATC)ATC1=1/2Q1ATC2=1/4Q2ATC3=1/4Q3As the COO, you need to ?

And 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 outputsshould 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?