Question
Suppose market demand is given by P=100-Q. The only producer in this market has marginal costs given by MC=2Q. - How much will this monopolist
Suppose market demand is given by P=100-Q. The only producer in this market has marginal costs given by MC=2Q.
- How much will this monopolist produce and what price will it charge?
- Calculate the elasticity of demand at the point of equilibrium
- How much is the deadweight loss created by this monopoly?
- Suppose that there is now a toxic byproduct in the production process that pollutes the air. It has been calculated that the air pollution is equivalent to $25 for every unit of output produced by the monopolist. How much is the deadweight loss created by the monopoly in this market with externality? Explain.
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