Question
Consider ademand function for a monopolistwhereP =50- 0.25Q; total cost function isTC = 20 +5Q + 0.2Q2;Answer the following questions a) What is theprofit-maximizing rate
Consider ademand function for a monopolistwhereP =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/)whererepresents price elasticity of demand. [4 marks)
c) Use the Lerner index to measure the level of market power. [3]
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Macroeconomics
Authors: David Colander
8th edition
978-0078004407, 78004403, 978-0077247171, 77247175, 978-0077307110
