What will be the answers to these two JNU questions

[bhavya jain]

1) the home marginal propensity to consume exportable is greater than the elasticity of
the foreigner's offer curve, then in the absence of inferior goods, a tariff
(a) lowers the domestic prices of importable
(b) increases the domestic prices of importable
(c) No impact on domestic prices
(d) Cannot say

2) monopolist has constant marginal costs at Re 1 per unit, and zero fixed costs. It faces
the demand curve D(p) =100/ p , p less than equal to 20
                                   0, p > 20      ; where p is price.
What is the profit maximizing choice of output?
(a) 20
(b) 5
(c) 1/99
(d) 10

[Arushi :))]

for the second ques..
the demand curve has price elasticity of -1
this implies that MR=0 always... and MC=1 ... hence on an additional unit the monopolist produces he is on loss..
We see whenever p<20 , total revenue is always 100...
since MC=1 ..we can assume that total cost=Q
hence to maximize profit he must produce the lowest number of units of good...
ie. 1/99

[don123]

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[Arushi :))]

ohh.. yess my bad... 5 is the ans.. :)

[don123]

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[SoniaKapoor]

How is the ans 5???I didnt get it

[Akshay Jain]

case 1..if Q=20 then P=5 acc to demand function
(TR)Total revenue=100 and (TC)Total cost is 20
(NP)Net Profit=100-20=80
case 2..if Q=5 then P=20
TR=100, TC=5
NP=95
case 3..if Q= 1/99 then P>20 (not possible coz of constraint on demand function if P>20 then Q=0)
case 4...if Q=10 then P=10
TR=100, TC= 10
NP=90

clearly profit is maximized at Q=5

[bhavya jain]

Akshay, can u plz explain how to do question 1

[don123]

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