Question

2. The market for a good has an inverse demand curve of p = 40 – Q and the costs of producing the good are defined by the following total cost function: TC = 100 + 1.5Q2.

a. If this good is produced in a monopoly market, provide a graph of the demand curve, marginal revenue curve and marginal cost curve. Then calculate the equilibrium output and price .

b. Calculate the price elasticity of demand at the equilibrium price and quantity. Does demand have to be elastic or inelastic at the equilibrium market price in a monopoly? Explain your answer

c. Calculate the profits of this monopoly firm at the equilibrium price and output and show the area of profits on your graph. You will need to provide a graph of your ATC curve to do this. (Hint: ATC = MC at the minimum point of ATC.)

d. Calculate the Lerner Index for this company at its equilibrium price. How can you interpret this value? e. Calculate the deadweight loss that is created in this market and discuss what the deadweight loss represents

Answer #1

2. The market for a good has an inverse demand curve of p = 40 –
Q and the costs of producing the good are defined by the following
total cost function: TC = 100 + 1.5Q2.
a. If this good is produced in a monopoly market, provide a
graph of the demand curve, marginal revenue curve and marginal cost
curve. Then calculate the equilibrium output and price.
b. Calculate the price elasticity of demand at the equilibrium
price and...

2. The market for a good has an inverse demand curve of p = 40 –
Q and the costs of producing the good are defined by the following
total cost function: TC = 100 + 1.5Q2.
a. If this good is produced in a monopoly market, provide a
graph of the demand curve, marginal revenue curve and marginal cost
curve. Then calculate the equilibrium output and price
. b. Calculate the price elasticity of demand at the equilibrium
price...

2. (10+10+6) Suppose you have the
following data:
Market demand is
P =
200 – 5Q
Total Cost Function is
TC = 150 + 6Q+ 2Q2
a) If this market has only one firm
(monopoly), compute the quantity, price and profit of this firm.
Compute PS.
b) If this market had many firms
(Perfect Competition), compute competitive market output, price,
and profit. Compute TS.
c). Illustrate your answers in (a) and
(b) on the same graph. Your graph...

2. (10+10+6) Suppose you have the
following data:
Market demand is
P =
200 – 5Q
Total Cost Function is
TC = 150 + 6Q+ 2Q2
a) If this market has only one firm
(monopoly), compute the quantity, price and profit of this firm.
Compute PS.
b) If this market had many firms
(Perfect Competition), compute competitive market output, price,
and profit. Compute TS.
c). Illustrate your answers in (a) and
(b) on the same graph. Your graph...

A
monopoly has an inverse demand curve given by: p=28-Q
And a constant marginal cost of $4. Calculate deadweight loss
if the monopoly charges the profit-maximizing price.
Round the number to two decimal places.

(a) Consider a monopoly market with the following demand
equation for a good Z.
P = 100 – 0.2 Q
Suppose fixed cost is zero and marginal cost is given by MC =
20.
Answer the following questions.
(i) Based on the information given, draw the diagram which shows
the marginal revenue (MR) curve, marginal cost (MC) curve and the
demand (D) curve of the monopoly. Show the value of X and Y
intercepts for these curves.
(ii) Explain why...

A monopolist faces inverse demand p = 40 − 2q and has a marginal
cost of 20.
(a) [20 points] What output will the monopolist produce?
(b) [10 points] What are consumer surplus, monopoly profits, and
deadweight loss?
(c) [10 points] Suppose the monopolist’s costs rise to 90. What
are consumer surplus, monopoly profits, and deadweight loss
now?
Please help to explain part (c).

The inverse demand curve for wheat is p = 10 – 0.10Q and the
inverse supply curve is p = 0.40Q, where p = dollars per bushel and
Q is billions of bushels of wheat. Wheat is bought and sold in a
perfectly competitive market.
a. Provide a graph of the market for wheat and calculate and
show the equilibrium price and quantity (in billions of bushels) in
the market.
b. If the government provides a price support of $9...

A monopoly has an inverse market demand of ? = 100 − ? where ?
is the market price and ? is the market quantity demanded and a
constant marginal cost of $50. Find the deadweight loss caused by
the allocative inefficiency of the monopoly.

A monopoly is facing inverse demand given by P = 40−0.5Q and
marginal cost given by MC = 7+0.1Q. Illustrate these on the graph
and answer the questions below.
(a) If the monopolist is unable to price discriminate, what is
the profit-maximizing quantity? What is the price? What is consumer
surplus? Producer surplus? Deadweight loss?
(b) Suppose instead the monopolist is able to perfectly price
discriminate. How many units will be sold? What is consumer
surplus? Producer surplus? Deadweight loss?

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