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Question 4. Consider a monopolist facing a demand curve of the form 13(3)) : 100 2p where p is the unit price. Suppose the monopolist
Question 4. Consider a monopolist facing a demand curve of the form 13(3)) : 100 2p where p is the unit price. Suppose the monopolist has a constant marginal cost of production of $2 a unit. Bunter was asked to determine the price which would maximize consumer surplus. Here is his solution: Total surplus as a function of price is ISUUOU 2:3)d33. The derivative of this with respect to p is (100 2p). This is maximized by making p as large as possible, i.e., p : 50. Is Bunter correct? If not, what is the error that Bunter has made
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