Question
A Monopolist faces inverse demand curve P = 270 - Q and produces output at constant marginal cost MC = 30. a. If the monopolist
A Monopolist faces inverse demand curve P = 270 - Q and produces output at constant marginal cost MC = 30.
a. If the monopolist charges a uniform price, what price maximizes its profit? How much profit does it earn (assuming no fixed costs)?
b. Under the optimal uniform price from part (a), what is the deadweight loss?
c. Suppose that the demand curve above represents the demand of a typical consumer and that the monopolist employs a declining price schedule. Describe the schedule. What is the price of the qth unit sold? How many units will the monopolist sell to this consumer.
d. What is the deadweight loss under the optimal declining price schedule?
e. Suppose that the demand curve above represents the demand of a typical consumer and that the monopolist employs a two-part tariff consisting of a fixed fee F and a price per unit consumed p. What values of F and p maximize the monopolist's profit?
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