Question

(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 the monopoly will not produce along the lower half of the demand curve.

(iii) Calculate the profit-maximizing price (P_{M}) and
quantity (Q_{M}) of the monopoly in the market. Show
P_{M} and Q_{M} in the diagram in part (i) and show
your calculations in the spaces below.

(iv) Calculate the profit earned by the profit-maximizing monopoly. Show your calculation in the spaces below.

(v) Calculate the consumer surplus (CS) and producer surplus (PS) of the monopoly and the resulting deadweight loss (DWL). Show CS, PS, and DWL in your diagram in part (i).

(vi) Calculate the market equilibrium (i.e. P_{PC} and
Q_{PC}) that maximizes social surplus. Calculate producer
surplus (PS) and consumer surplus (CS) for this case. Show your
calculations in the spaces below.

Answer #1

A) i) MR curve slope is double to that of Demand curve

So MR = 100 -.4Q

Graph

ii) in the lower half of the demand curve, demand is in-elastic, & Monopolist never operates on in-elastic portion of demand Curve

*also in lower half, MR is negative, but MC is always
positive,*

*so at monopoly eqm, MR should equal MC,which is not possible
in lower half portion of demand curve .*

*.*

*iii) at monopoly eqm*

*MR = MC*

*100-.4Q = 20*

*.4Q = 80*

**Q* = 200**

**PM = 100- .2*200 = 60**

**graph**

.

iV) π = (PM - MC)QM

= (60-20)*200

= 40*200

= **8,000**

**v) CS =** .5*(100-60)*200

= .5*40*200

= **4000**

**PS = π = 8,000**

**( With constant MC , PS = π)**

**DWL =** .5*(60-20)*(400-200)

= .5*40*200

= 20*200

= **4,000**

**graph**

**.**

Vi) P= MC

100-.2Q = 20

Q* = 80/.2 = 400

QPC = 400

PPC = 20

CS = .5*(100-20)*400 = 40*400

= 16,000

PS = 0

The market demand curve for soy beans is estimated to be Qd =
80 – 4P and the market supply curve is given by Qs = 4P. Show your
work so I know what equations you are using.
a. Assume that this industry is perfectly competitive. What is
the EQM P and EQM Q of soybeans?
b. Calculate the consumer and producer surplus (CS and PS) at
the perfect competitive equilibrium.
Now assume that this industry is monopolized. Show your...

1.Consider a single-price monopolist facing a demand curve of ,
where P is market price and q is quantity. The monopolist incurs
$40 as fixed cost. The monopolist’s variable cost function is given
by , where is quantity. In this market, what is the consumer
surplus (CS), producer surplus (PS), monopolist’ profits ( and
deadweight loss (DWL)?
Group of answer choices
a. CS=1000; PS=1250; =1210; DWL=0
b. CS=625; PS=1250; =1250; DWL=1250
c. None of the other answers is correct
d....

A monopoly has the following demand and total cost
curves:
Demand: P=500-5Q
Costs: TC=200Q+10Q^2
You also know its marginal cost and marginal revenue
curves:
MC=200+20Q
MR=500-10Q
What is the Deadweight Loss for Monopoly? What is Consumer
Surplus? (Hint: it would help to draw a graph for this question, as
you did in the Extra Credit)
Select one:
a. DWL=$100; CS=$250
b. DWL=$50; CS=$250
c. DWL=$100; CS=$150
d. DWL=$50; CS=$150

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?

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.

The demand curve of a perfectly competitive product is
described by the equation:
P = $1000 – Q where Q =
thousands
The supply curve is given by
P = $100 + 2Q where Q =
thousands
Graph the demand and supply curves; use a grid size of 100.
Calculate the equilibrium price and quantity (carefully state the
units). Find the consumer surplus CS, the producer surplus
PS, and the deadweight loss DWL, carefully stating the units.

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specified by the following equations:
P(Q) = 100 − Q
TC(q) = 30q
(a) Suppose there is a monopoly in the industry. Derive an
equation for marginal revenue of the monopolist. Graph the demand
and marginal revenue curves.
(b) Derive the marginal cost (MC) and average cost (AC) of milk
production. Graph MC and AC on the same graph as (a).
(c) Show the monopoly’s profit-maximizing price...

The government imposes a 20% ad valorem tax on a monopoly with
cost curve C(Q) = 10 + 4Q^2 facing demand curve 200-5Q. Round your
answers to one significant digit after the decimal point at each
step. Don't copy others' answers, or I will report you.
Consumer surplus CS(Q)=
Producer surplus PS(Q)=
Government revenues T(Q)=
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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
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following data:
Market demand is
P =
200 – 5Q
Total Cost Function is
TC = 150 + 6Q+ 2Q2
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(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...

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