problem set 6

Question 1

how to find out average fixed cost

Answer 1

fixed cost divided by quantity

Question 2

how to find average cost function

Answer 2

marginal cost + average fixed cost

Question 3

how to find revenue function

Answer 3

inverse demand function (p=) multiplied by q

Question 4

how to find profit maximising point

Answer 4

where marginal revenue = marginal cost

Question 5

how to find elasticity of demand now

Answer 5

(p-MC)/p=-1/e. this is the lerner index!!

Question 6

what are cost functions for nash cournet equilibrium

Answer 6

(p-MC) q1
(p-MC)q2

Question 7

how to find stackelberg equation

Answer 7

sub q2 in the form of q1 into the profit function (from differentiated profit functions set equal to zero). then differentiate it and set equal to zero to solve for q1.