Question
There is only one coffee shop in your town - i.e. the coffee shop has a monopoly in the local market. The demand curve for
There is only one coffee shop in your town - i.e. the coffee shop has a monopoly in the local market. The demand curve for coffee is given by P = 10 0.05Q. The total cost curve for coffee is given by T C = 50 + Q.
(a) What is the profit maximizing price and quantity of coffee?
(b) How much profit will the firm earn?
(c) Graph the demand curve, marginal revenue curve, and marginal cost curve, and show the profit maximizing quantity and price on your graph.
(d) How much dead weight loss is there in this market relative to perfect competition? Show it on the graph.
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