Question

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).**

Answer #1

1. Suppose a monopolist faces an inverse demand function of P =
150 ? 2Q. The firm’s cost functions is 30Q.
(a) What is the firm’s marginal cost? Average cost? How about
the firm’s marginal revenue?
(b) What would the firm charge if they were a single price
monopolist?
(c) What is the consumer surplus, producer surplus, and dead
weight loss.
(d) Suppose the monopolist is able to perfectly price
descriminate, what are the consumer surplus, producer surplus, and
dead...

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?

The demand a monopolist faces is D(p) = 200 0
0.5p and the fifirm’s total cost is
c(q) =
150 + 20q.
1. Compute the profifit maximizing price and quantity, assuming
that the monopolist charges
a uniform price.
2. Draw a graph that illustrates the monopolist’s problem and
mark on it the consumer
surplus and the deadweight loss.
3. Compute consumer’s surplus, monopolist’s profifits and the
deadweight loss at the monopoly
price.

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.

A monopoly faces the following inverse demand function:
p(q)=100-2q, the marginal cost is $10 per unit.
What is the profit maximizing level of output, q*
What is the profit maximizing price
what is the socially optimal price
What is the socially optimal level of output?
What is the deadweight loss due to monopoly's profit maximizing
price?

A monopolist faces an inverse demand of p(y)=100-5y, and its
total cost of production is c(y)=20y, where y is the output level.
The monopolist maximizes its profits at output level equal to 8.
Calculate the deadweight loss of this monopoly.

Monopoly
Consider a situation where a monopolist faces the following
inverse market demand curve
p = 132 − 2q
and the following cost function
T C = 12q + 2q 2
f) How much deadweight loss does the monopolist create?
g) What could the government do to regulate the monopolist?

Suppose a monopolist faces the following demand curve: P = 750 –
Q.If the long run marginal cost of production is constant and equal
to $30.
a) What is the monopolist’s profit maximizing level of
output?
b) What price will the profit maximizing monopolist charge?
c) How much profit will the monopolist make if she maximizes her
profit?
d) What would be the value of consumer surplus if the market
were perfectly
competitive?
e) What is the value of the...

Assume that the inverse demand function for a good is P = 40 –
2Q. A monopolist retailer has exclusive rights to sell this good. A
monopolist manufacturer sells the good to the retailer at price R.
The retailer has an additional marginal cost equal to $2 per unit.
The manufacturer’s marginal cost is $4 per unit.
a. Assume that the two firms remain independent. Determine the
value of R charged by the manufacturer.
b. Now assume that the two...

Example 1:
Suppose a monopolist faces an inverse demand function as p = 94
– 2q. The firm’s total cost function is 1.5q2 + 45q +
100. The firm’s marginal revenue and cost functions are MR(q) = 90
– 4q and MC(q) = 3q + 45.
How many widgets must the firm sell so as to maximize its
profits?
At what price should the firm sell so as to maximize its
profits?
What will be the firm’s total profits?

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