Question

If the inverse demand curve is P = 120 – 20Q and the marginal cost is constant at $20, how does charging the monopoly a specific tax of $10 per unit affect: a. the monopoly’s profit maximizing level of output, price, and profit, and b. consumer surplus producer surplus and total welfare (where society’s welfare includes the tax revenue?

Answer #1

p = 120-20Q; MC = 20, r = 10 per unit.

Total revenue is TR = P*Q = 120Q - 20Q^2.

Marginal revenue is MR = TR' = 120 - 40Q.

Monopolist quantity produced is maximized, if MR = MC.

120 - 40Q = 20.

or, Q = 2.5

We find optimal price from the demand curve: P = 120 - 50 = $70.

TR = 70 * 2.5 = 175.

If the tax is imposed, new demand curve will be: P - 10 = 120 – 20Q.

P = 130 - 20Q

TR = 130Q - 20Q^2

MR = 130 - 40Q.

We find new equilibrium, where MR = MC.

130 - 40Q = 10

or, 40Q = 120

or, Q = 3.

P = 130 - 20Q

or, P = 70 .

TR = 210.

So, we can see, that monopolist would be better off, because its total revenue increased. Nevertheless, as the price increased, consumers will pay more, which is not good result of imposing tax either for consumers, or for society.

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?

1) The inverse demand curve a monopoly faces
is
p=110−2Q.
The firm's cost curve is
C(Q)=30+6Q.
What is the profit-maximizing solution?
2) The inverse demand curve a monopoly faces
is
p=10Q-1/2
The firm's cost curve is
C(Q)=5Q.
What is the profit-maximizing solution?
3) Suppose that the inverse demand function for
a monopolist's product is
p = 7 - Q/20
Its cost function is
C = 8 + 14Q - 4Q2 + 2Q3/3
Marginal revenue equals marginal cost when output
equals...

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.

The inverse demand for the monopolist's output is P = 240 − 20q
and its marginal cost is MC = 40. Find the prot maximizing price
(Pm) and the quantity for the monopolist (qm).

Assume the inverse demand curve a monopoly faces is p = 100 -
2Q, and MC is constant at 16.
Find the monopoly’s profit maximization output.
Find the monopoly’s profit maximization price.
Find the monopoly’s maximum profit.
Find the monopoly’s deadweight loss.
Please show work for parts c and d

A monopolist faces an inverse demand curve P(Q)= 115-4Q and
cost curve of C(Q)=Q2-5Q+100.
Calculate industry output, price, consumer surplus, industry
profits, and producer surplus if this firm operated as a
competitive firm and sets price equal to marginal cost.
Calculate the dead weight loss sue to monopoly.

Suppose the doll company American Girl has a demand curve of P =
150 – 0.25Q. The marginal cost is given by MC = 10 + 0.50Q. A)
Calculate consumer surplus and producer surplus at the profit
maximizing level of output. B) Calculate deadweight loss at the
profit maximizing level of output. C) Calculate consumer surplus,
producer surplus, and deadweight loss at the efficient level of
output.

Inverse Demand Equation: P=160–4Qd Marginal Revenue =
160-8Qd Marginal Costs = $0
What is price and quantity under perfect
competition?
What price would a monopoly charge? How much will it
produce?
What is the deadweight loss due to
monopoly?
If the monopolist can practice perfect price
discrimination what is consumer surplus? What is producer
surplus?

A monopolist has a cost function given by C(Q)=Q2 and
faces the demand curve p=120-q
a. what is the profit maximizing monopolist output and price
b. what is the consumer surplus ? Monopoly profit?
c. now suppose the monopolist has to follow the narginal cost
pricing policy in other word she has to charge competitive prices
what is her output and price?

Suppose that the demand curve for wheat is D(p) = 120 − 10p
and the supply curve is S(p) = 2p.
Compute the consumer and producer surplus at the equilibrium.
Indicate them on a clearly marked graph.
Assume that the government imposes a specific tax of $2.4 on
wheat, to be paid by the consumers. Compute the government revenue
and the deadweight loss generated by this tax.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 12 minutes ago

asked 32 minutes ago

asked 41 minutes ago

asked 55 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago