JNU 2010

[Ankit Agrawal]

Hey guys. I was thinking that if you post all your doubts relating to a particular paper/category at one place, it will greatly ease things and avoid double posting of the same questions. Hence, If you have any doubts related to JNU 2010 paper then please post it here.

Q18 A monopolist faces the following demand function D(P):
D(P)= 10 for P in the interval [0,10]
         20-P for P in the interval (10,20)
        0 for P in the interval [20, infinity)

Now suppose that the monopolist has zero-variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of Rs. 50. What is the optimal monopoly price?

(a) 15
(b) 10
(c) 5
(d) There is no monopoly equilibrium


Q 22 A monopolist has a demand curve with constant price elasticity with absolute value 4. The monopolist charges a price of 60 per unit of output. What is its marginal cost at this level of output?

(a) 23.5
(b) 136
(c) 45
(d) 54

Other Doubts: (related to Q 19) Can a consumer's budget set include (0,0), where (x,y) are the units of consumption of x and y? Yes or No?

[Ayushya Kaul]

Are the answers of 18 and 22, (b) and (c) respectively?

[Ankit Agrawal]

I have no idea about Q 22.

In Q 18, I am confused between (b) and (d). Though I am leaning toward (b).

[Sumit]

Q18. b)
Q19. b)
Q22. c)

[Ankit Agrawal]

Hi sumit

Can you tell me how you solved q 22?

On 15 May 2013 21:19, "Sumit [via Discussion forum]" <[hidden email]> wrote:

Q18. b)
Q19. b)
Q22. c)

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[RHIDIMA]

Can u plz explain how did u do Q18...

[Akshay Jain]

sol 22. in any market price and mc relation is given by MC=P(1-1/Ed)
substitute the values of P=60 and Ed=4 and get mc=45

[Ayushya Kaul]

There's a formula mate:
MR= MC=p(1-1/elasticity)

[RHIDIMA]

Can u plz solve Q 18..

[Akshay Jain]

for ques no. 18 try to construct the demand curve on X Y plane
the vertical intercept will be at p=20 and horizontal intercept will be at q=10 with a kink at p=q=10
total cost will remain fixed=50
now consider option A..TR=15*5=75
if we decrease price by 1 unit and thus increase quantity by 1 unit we will get larger profit
at p=14 TR=14*6= 84 and so on
finally we will reach at p=q=10 with TR=100
at a price less then 10 q will remain constant at any price so TR will decrese
so ans is P=10 which max profit

[RHIDIMA]

In the evaluation of option A, u  took TR=15*5. Can u plz tell me what is this 5 here?