Question
Benson's Park is a monopolist in the local camping market in the town of West Anderson. They face an inverse demand curve given by P=400-8Q,
Benson's Park is a monopolist in the local camping market in the town of West Anderson. They face an inverse demand curve given by P=400-8Q, where Q is the number of tickets they sell. The park's cost function is C(Q)=100+16Q. a. Write down Benson's profit function (2 point) b. Find the first-order condition for profit maximization. (2 points) c. Find the profit-maximizing price and quantity, and the maximum profit. (3 points) d. Calculate the consumer surplus in the market at the monopoly price and quantity. (Hint: you may find it helpful to graph the demand curve, marking the monopolist's price and quantity on your graph.) (3 points) e. If price were set equal to marginal cost, what would be the value of consumer surplus and profit? At the monopoly price and quantity, find the value of the deadweight loss. (4 points)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started