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You are given with the information for a monopolist in the market. Let the market demand be shown as in the following table. Price Quantity
- You are given with the information for a monopolist in the market. Let the market demand be shown as in the following table.
Price
Quantity
$20
0
$15
50
$10
100
$8
120
$6
140
$5
150
$4
160
Price | Quantity |
$20 | 0 |
$15 | 50 |
$10 | 100 |
$8 | 120 |
$6 | 140 |
$5 | 150 |
$4 | 160 |
In addition, let the marginal cost of the firm be $5 as a constant, the fixed cost be $60.
Answer the following questions:
- What is the firm's optimal level of production? What is the price that this monopolist will charge at this level of production?
- What is the shape of the firm's average total cost curve? What is the shape of the firm's average variable cost curve?
- Suppose the government imposes a price ceiling as $9.50 per unit of the product, what will be the possible response from this monopolist? What's the consumer surplus in this case?
- Compare to the full competition market what is the lost due to the monopoly?
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