Assignment One
Course Macroeconomics
Total mark 10%
Instructions:
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This is a group assignment. A group should consist of 3 to 5 people. Assignments submitted
individually will not be accepted.
Submit your assignment on or before March 1, 2017
1. Discuss in detail the long run profit maximization of monopoly?
2. Suppose that a monopolist faces two markets with demand curves given by
Q1 = 100 – P1
Q2 = 100 – P2
Assume that the monopolists marginal cost is constant at $20 a unit. Calculate
a. If the monopolist can discriminate the price of its output for its customers, what price it
would charge in each market to maximize profit?
b. What if the monopolist would not discriminate price? Then what price should the
monopolist charges?
3. Will a monopoly ever provide a pareto efficient level of output on its own?