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6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. $120- MC 110 100 90- 80 70 60- 50 - 40 - 30 20 10 MR 10 11 12 13 14 15 Quantity a. Determine the profit-maximizing output and price. MC=MR at an output of 3. Following the demand curve upward; we see that the profit maximizing price is $70 b. What price and output would prevail if this firm's product were sold by price-taking firms in a perfectly competitive market? For this, we want to find where the marginal cost and demand curve intersect. This happens at a price of $60, where the output is 4 c. Calculate the deadweight loss of this monopoly. 1/2*b*h b = competitive output - monopoly output h = monopoly price - price level where MC=MR b = 4-3 = 1 h = 70-40 = 30 0.5*1*30 = $15