Question
Consider the following market with a single firm. Demand: P = 180 - 2 Q Marginal Cost: MC = 57 + Q PART A. If
Consider the following market with a single firm.
Demand: P = 180 - 2 Q
Marginal Cost: MC = 57 + Q
PART A. If the firm is a single price monopolist, it will produce a quantity QM = ____ . The equilibrium price will be PM =__ __.
PART B. If this firm were a price taker and P = MC, it would produce a quantity Q = 41 and price P = 98. Given this, the monopoly deadweight loss (the money left on the table) is _____ dollars.
PART C. Now suppose the firm is a two-price monopolist, separating its customers along the lines of their reservation prices, with a high price retail market and a lower discount price market. The price and quantity in the retail market is the same as what you found in Part A. All remaining customers are potential buyers in the discount market.
The quantity that maximizes the monopolist's profits in the discount market is QD = ___ and the equilibrium price in the discount market is PD = _____.
PART D. As a result of the monopolist offering a discount price, the monopoly deadweight loss is reduced to ___.
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