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A monopolist faces an inverse demand of P(Q) = 250 262 and constant marginal costs. a) Calculate the optimal price, quantity and total revenues, for
A monopolist faces an inverse demand of P(Q) = 250 262 and constant marginal costs. a) Calculate the optimal price, quantity and total revenues, for M C = 10 and M C = 30. b) Repeat question a) under perfect competition with constant marginal costs for M C = 10 and M C = 30. 0) Discuss how the marginal cost increase from 10 to 30 affects revenue in the monopoly case vs perfect competition. Relate your answer to the price elasticity of demand. (1) Take the mon0poly equilibrium at M C = 10. Now the government imposes a maximum price of $50. Discuss the effects of this measure. e) Instead of the maximum price, the government gives the monopoly a subsidy of $10, so the marginal cost of the mon0poly effectively drops to zero. Discuss the welfare effects and compare with perfect competition
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