Waldman/Jensen – Industrial Organization Theory and Practice, Fourth Edition
Chapter 3
Page 2
Problem 2:
a. The firm sets P = MC. 50 = 2q+30; q=10. Because we only are given one of many
Problem 4:
a. Firm sets P = MC. 2q=60; q = 30
Problem 6:
Problem 8:
a. MR = 55 – 4Q
b. set MR = MC; 55 – 4Q = 2Q – 5; Q = 10; P = 55 – 2(10) = 35
c. Profits = 35(10) – [102 – 5(10) + 100] = 350 – 150 = 200
Chapter 3
Page 3
Problem 10:
As indicated in Figure Problem 3A.2, without trade the equilibrium price and quantity
are:
P=100-qUS=62.5
37.5=
q
yields
q
for solving
Supply=
q
+25=
q
–100=Demand
USUS
USUS
Chapter 3
Page 4
q
3
2
+25=P
q
+37.5=P
2
3
37.5–P
2
3
=12.5)–P
2
1
(+25)
–(P=
q
+
q
=
q
12.5–P
2
1
=
q
and 25
–P=
q
totaltotal
fUStotal
fUS
⇒⇒
⇒
Waldman/Jensen – Industrial Organization Theory and Practice, Fourth Edition
Chapter 3
Page 5
Without trade, CS + PS = 703.125 + 703.125 = 1406.25
1462.5 – 1406.25 = 56.25
703.125=
)
(37.5
2
1
=
PS
2
trade w/o
