Question
1.Consider ademand function for a monopolist is P =25- 0.25Q; total costs are TC =10+5Q + 0.2Q2; marginal revenue is MR =15-2Q; and marginal cost
1.Consider ademand function for a monopolist is P =25- 0.25Q; total costs are TC =10+5Q + 0.2Q2; marginal revenue is MR =15-2Q; and marginal cost is MC =5+ 0.5Q.Answer the following questions.
a)What is theprofit-maximizing rate of outputand price?[10]
b) Calculate the monopolist welfare loss (WL), where1/2*1/and represent price elasticity of demand. [5
c)Use the Lerner index to determine if market power exists. [5]
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Introductory Econometrics A Modern Approach
Authors: Jeffrey M. Wooldridge
2nd Edition
0324113641, 9780324113648
