Question

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.

Answer 1