Question
A monopolist faces a market demand given by Q = 76 - P, whose marginal revenue is MR = 76 -2Q. a) Compute the consumer
A monopolist faces a market demand given by Q = 76 - P, whose marginal revenue is MR = 76 -2Q. a) Compute the consumer surplus at p = 0, 20, and 50. b) If the monopolist has constant average and marginal costs AC = MC = 6, what output level will it choose in order to maximize profits? What are the monopoly price and profits? c) Assume instead that it has cost function given by TC = 0.25Q2 -5Q + 300, what are the monopoly supply, price and profits? d) Assume now that the cost function is TC = 0.333Q3 -26Q2 + 695Q - 5800, whose marginal cost is MC = Q2 -52Q + 695. Again, find monopoly supply, price and profits. e) Graph the market demand curve, MR curve, and the three MC curves from parts (b-d). f) Compute the deadweight loss in part (b).
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