Question
Consider a demand function for a monopolist where P = 50 - 0.25Q; total cost function isTC = 20 + 5Q + 0.2Q2; Answer the
Consider a demand function for a monopolist where P = 50 - 0.25Q; total cost function isTC = 20 + 5Q + 0.2Q2; Answer the following questions
a) What is theprofit-maximizing rate of output?[3 marks)
b) Calculate the monopolist welfare loss (WL), where WL= 1/2*(1/)where represents price elasticity of demand. [4 marks)
c) Use the Lerner index to measure the level of market power. [3]
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Microeconomics
Authors: Paul Krugman, Robin Wells
3rd edition
978-1429283427, 1429283424, 978-1464104213, 1464104212, 978-1429283434
