Question

Question 5 [20 marks]

Foursome Inc. is the monopolist in the four-toe socks market. The product does not sell very well, but some people buy it as a present for their in-laws. In particular, the market demand is given by

P = 24 − Q
where P and Q are the market price and quantity of four-toe socks, respectively. The cost

2

(a) Find the profit-maximising price and quantity for Foursome Inc. (b) Calculate the profit of Foursome Inc. (c) Calculate the dead-weight loss associated with the monopoly power of Foursome

function of producing q units is given by the cost function c(q) = 5q . Foursome Inc. practises simple monopoly pricing.

Inc.

Answer 1