2. (8) Suppose a monopolist faces a market demand curve given by P = 50 - 0.5*...

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2. (8) Suppose a monopolist faces a market demand curve given by P = 50 - 0.5*Q. Marginal cost is initially equal to zero and constant.

a. (4)Calculate the profit maximizing price and quantity. Use the Lerner index to calculate the price elasticity of demand at this point. What is the amount of deadweight loss associated with this monopoly?

b. (4) Suppose marginal cost increases to MC = 10 for all units while demand and marginal revenue remain constant. Calculate the new profit maximizing price, quantity, the price elasticity of demand, and deadweight loss.

Posted Date: Jun 11, 2024 10:01 PM

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2. (8) Suppose a monopolist faces a market demand curve given by P = 50 - 0.5*...

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