Question
The technology of an industry is given by the cost function C = 60+ 2Q. Demand is Q = 22-p and the industry is served
The technology of an industry is given by the cost function C = 60+ 2Q. Demand is Q = 22-p and the industry is served by a monopolist. Answer the following questions: a. Calculate the monopoly price. Graph the solution. b. Compute the Price Cost Margin (PCM = (p-MC)/p ) and use it to estimate the elasticity at the monopoly price. c. Calculate the AC or total cost per unit at which the monopolist is producing. What would be this cost if the monopolist were producing the competitive quantity? d. What would be the cost per unit of producing this competitive quantity half and half by two firms? Represent your answers in a diagram. How do we call this situation? e. Represent and calculate the welfare or deadweight loss determined by the monopoly pricing
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