(40 pt.) a monopolist has a quadratic cost function c(q) = q2 + 12. the market demand is given by q(p) = 24 − p. a. (5 pt.) find inverse demand function p(q) and revenue function r(q). b. (5 pt.) write down the profit maximization problem of this monopolist. c. (10 pt.) determine the monopolist’s choice qm that maximizes profit by investigating the first- and second-order conditions. d. (10 pt.) find the price p m the monopolist would set up and calculate the profit at the monopoly outcome. e. (10 pt.) find market outcome (qc , p c ) in which the monopolist behaves as if in a competitive market, and calculate the profit at this outcome.

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.