Question
The Buy n Large Corporation (BnL) is a monopolist in a market with the demand function: Qd = 320 4p BnLs marginal cost function is:
The Buy n Large Corporation (BnL) is a monopolist in a market with the demand function: Qd = 320 4p BnLs marginal cost function is: MC = 20 + Q/4 and its average total cost function is: ATC = 240/Q + 20 + Q/8 (a) Based on the demand function given, determine BnLs inverse demand function and marginal revenue function.
(b) Algebraically determine BnLs profit-maximizing quantity and price.
(c) Determine the profit made by BnL.
(d) Suppose the government regulates BnL, so that they are forced to lower their price until social welfare is maximized. Determine the regulated price and quantity.
(e) Draw a graph showing the demand curve, marginal revenue curve, and marginal cost curve. Label all axes and curves. Mark out all intercepts, the profit-maximizing price and quantity, and the regulated price and quantity.
(f) Determine the deadweight loss caused by BnLs market power. Use your graph to help accomplish this.
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