Question
A monopolist operates with the following data on cost and demand. It has a total fixed cost of $1000 and a total variable cost of
A monopolist operates with the following data on cost and demand. It has a total fixed cost of $1000 and a total variable cost of Q2, where Q is the number of units of output it produces. The firm's demand function is Qd = 60-0.5p. The firm expects the conditions of demand and cost to continue in the foreseeable future.
a) What is the inverse market demand curve?
b) What is the marginal revenue function that corresponds to the market demand curve?
c) What is the monopolist marginal cost function?
d) What is the firms revenue if it operates and it maximizes profit?
e) What is the dead weight loss from the monopoly pricing?
f) Should the firm continue to operate in the short run, or should it shut down?
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