Spreadsheet Problems
S1. Imagine that the perfectly competitive market described in Chapter 7,
Problem S1, were transformed into a pure monopoly. (What were
formerly independent small firms are now production units owned by
the monopolist.) The cost structure of the typical unit continues to be
given by C 25 Q^2 4Q, and industry demand is Q 400 20P or,
equivalently, P 20 .05Q. Currently, the monopolist has 30
production facilities in place.
a. Create a spreadsheet similar to the example shown. Enter numerical
values for cells B14 and C8; all other cells should be linked by
formulas to these two cells.
b. In the short run, the monopolist can change output level QFbut
cannot vary the number of production facilities. Use the spreadsheet
optimizer to maximize the firm’s short-run profit.
c. In the long run, the monopolist can change output levels QFand the
number of production facilities. Use the spreadsheet optimizer to
maximize the firm’s long-run profit.346 Chapter 8 MonopolyAB C D E FG
1
2 Monopolist Controls
3 the Market
4
5 The Industry
6 Output Plants Price MR Tot Profit
7
8 180 30 11 2 870
9
10
11 The Typical Production Unit
12 QF MC Cost AC
13
14 6 8 37 6.17
15
16 Short Run: Maximize total profit: Adjust: QF
17 Long Run: Maximize total profit: Adjust QF& # firms
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