A Monopolist Has Total Production Costs Given by 0

question 13

Essay

A monopolist has total production costs given by 0.5 Q². The demand function in the "home" market is P = 20 -
0.5 Q
a)If the monopolist sells all its output to the home market, what is the equilibrium price and quantity?
b)Now suppose the monopolist has a choice between the home market and a foreign market in which the monopolist can sell any amount Q at a price of $12. Will the monopolist sell in the foreign market? If yes, what would happen to the price the monopolist charges in the home market?

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and salaries of supervisors.

Total Manufacturing Costs

The sum of direct materials, direct labor, and manufacturing overhead incurred in producing goods.

Direct Labor Cost

The wages and salaries paid to employees who are directly involved in producing goods or providing services.

Total Manufacturing Costs

The sum of all costs directly involved in producing a product, including raw materials, labor, and manufacturing overhead.