Actuarial Outpost C2 Nov 2000 #52
 Register Blogs Wiki FAQ Calendar Search Today's Posts Mark Forums Read
 FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

 Life Actuarial Jobs& Annuities,& Investments Worldwide Salary SurveysLife & HealthPension Property & Casualty DW Simpson & Co.Actuarial Recruitment Worldwide Casualty Jobs& Property -- WorldwideReinsurance,Insurance, Bureaus & Consulting

#1
11-05-2002, 12:57 AM
 Avi Wiki ContributorSite Supporter Site Supporter CAS AAA Join Date: Aug 2002 Location: NY Studying for the rest of my life. College: Alumnus - Queens College - CUNY Favorite beer: Stone Ruination IPA Posts: 12,501 Blog Entries: 3
C2 Nov 2000 #52

Why when the cap is placed at 3, do we use the Demand equation to determine amount produced? Since when is a monopolist producing at the demand as long as there is no optimal two-part tarriff? What changes from using the MR curve to the Q<sub>D</sub> curve?

--Avi

__________________
All scientists defer only to physicists
Physicists defer only to mathematicians
Mathematicians defer only to G-d!

--with apologies to Dr. Leon Lederman
#2
11-05-2002, 10:29 AM
 Gandalf Site Supporter Site Supporter SOA Join Date: Nov 2001 Location: Middle Earth Posts: 26,467

I can't answer in the terms you're using, but here's what's happening.

Monopolist wants to maximize its profit = Revenue - Costs = (8y - 4y^2) - (.5+2y) = 6y-4y^2-.5

Without constraints, you can get the maximum by setting dProfit / dy = 0; that's the same as saying Marginal Revenue = Marginal Cost.

With constraints, Revenue = 3y for y &lt;= 1.25 (the most you can charge is 3, and you will sell them all; people would be willing to pay more than 3).

Profit = 3y - (.5 + 2y) = y - .5, for y &lt; 1.25. That's an increasing function of y, produce as many as you can up to the 1.25 point where the Profit function is different.

At 1.25, profit function reverts to 6y - 4y^2 -.5. Derivative would be negative; don't produce any more.

I don't think you could do all that within exam time constraints, but maybe it will help you understand the study material.
#3
11-05-2002, 11:48 AM
 Avi Wiki ContributorSite Supporter Site Supporter CAS AAA Join Date: Aug 2002 Location: NY Studying for the rest of my life. College: Alumnus - Queens College - CUNY Favorite beer: Stone Ruination IPA Posts: 12,501 Blog Entries: 3

Thank you, the theoretical underpinnings always help to elucidate the material

--Avi
__________________
All scientists defer only to physicists
Physicists defer only to mathematicians
Mathematicians defer only to G-d!

--with apologies to Dr. Leon Lederman

 Thread Tools Display Modes Linear Mode

 Posting Rules You may not post new threads You may not post replies You may not post attachments You may not edit your posts BB code is On Smilies are On [IMG] code is On HTML code is Off

All times are GMT -4. The time now is 04:25 AM.

 -- Default Style - Fluid Width ---- Default Style - Fixed Width ---- Old Default Style ---- Easy on the eyes ---- Smooth Darkness ---- Chestnut ---- Apple-ish Style ---- If Apples were blue ---- If Apples were green ---- If Apples were purple ---- Halloween 2007 ---- B&W ---- Halloween ---- AO Christmas Theme ---- Turkey Day Theme ---- AO 2007 beta ---- 4th Of July Contact Us - Actuarial Outpost - Archive - Privacy Statement - Top