Y7

Ch. 9 Monopoly 1. Wilson has market power and produces basketballs. The firm faces a demand curve of Q = 30 - 0.5P, where Q is measured in thousands of basketballs and P is hundreds of dollars per machine. Wilson has a marginal cost curve that is equal to MC = 20. (a) Find the profit maximizing price and level of output. Find MR (b) Calculate the deadweight loss from market power at the firm's profit-maximizing level of output. (c) Draw a diagram illustrating the decision and the deadweight loss graphically. (d) What will be the equilibrium quantity if demand is given by Q = 25-0.25P. Does this illustrate the significance of the elasticity of demand of a good produced by someone with market power