Question

You are given the following information about a monopsonist: the demand is p = 35−0.25q, the average expenditure curve is ae = 0.5q, and the marginal expenditure curve is me = 1q. the quantity (q) is in thousands of units. given the information above, how much will the monopsonist purchase, and how much will it pay? (round your responses to two decimal places.) the monopsonist will purchase enter your response here thousand units at a price of $enter your response here per unit.

Answer 1

The monopsonist will purchase 23.33 thousand units at a price of $29.17 per unit. This is determined by setting marginal revenue equal to marginal expenditure and solving for quantity, then using the demand function to find the price.

Step-by-step explanation:

To determine how much the monopsonist will purchase and pay, we need to find the quantity where the marginal expenditure (ME) curve intersects the marginal revenue (MR) curve. To find the quantity, we set 1q equal to the marginal cost (MC). Since the average expenditure (ae) is given as 0.5q, we can find the average cost (AC) by dividing ae by q The MR can be derived from the demand curve (p = 35 - 0.25q) by differentiating it with respect to quantity (q), which gives us MR = 35 - 0.5q. Setting the MR equal to the ME (1q), we get:

35 - 0.5q = q

Solving for q gives us q = 23.33 thousand units. To find the price the monopsonist will pay, we plug this quantity back into the demand equation:

p = 35 - 0.25(23.33) = 29.17

Therefore, the monopsonist will purchase 23.33 thousand units at a price of $29.17 per unit.