Question

A monopolist faces a demand curve P= 24 – 2Q, where P is measured in dollars per unit and Q in thousands of units and MR=24 – 4Q. The monopolist has a constant average cost of $4 per unit and Marginal cost of $4 per unit. a. Draw the average and marginal revenue curves and the average and marginal cost curves on a graph. b. What are the monopolist’s profits-maximizing price and quantity? c. What is the resulting profit? Calculate the firm’s degree of market power using the Lerner index. d. A government regulatory agency sets a price ceiling of $10 per unit. i. What quantity will be produced and what will the firms profit be? 1. What happens to the degree of monopoly power (Lerner Index)? ii. What price ceiling yields the same level of output as a competitive equilibrium? 1. What is the firm’s degree of monopoly power at this price (Lerner Index)? 2.What is the profit at this price?

Answer #1

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...

. A town has a monopoly supplier of potable water. The
monopolist faces the following demand, marginal revenue, and
marginal cost curves:
Demand: P = 70 – Q
Marginal Revenue: MR = 70 – 2Q
Marginal Cost: MC = 10 + Q
Graph these curves.
Assuming that the firm maximizes profit, what quantity does it
produce? What price does it charge? Show these results on your
graph.
The local government decides to impose a price ceiling that is
10 percent...

A patent monopolist faces a demand curve: P=10-1/3 Q and total
cost F+2Q+2/3 Q^2, where F is non-negative.
i. What is the monopolist’s short-run profit-maximizing output
and price? What is his short-run profit per period?
ii. In addition to solving for the profit-maximizing output and
price, draw a graph showing the inear demand curve, the marginal
revenue and marginal cost curves that demonstrate the situation
described above

You have the following information about a monopolist
p = 20 - 2q (1)
MR = 20 - 4q (2)
MC = 8 (3)
where equation (1) denotes the monopolist demand curve, equation
(2) denotes its the marginal revenue function, and equation (3) is
the marginal cost, assumed to be constant here. (i) Use the Lerner
index to approximate the degree of monopoly power. (ii) Calculate
the deadweight loss.

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).

Suppose an industry demand curve is P = 90 − 2Q and each firm’s
total cost function is C = 100 + 2q 2 .
(a) (6 points) If there is only one firm in the industry, find
the market price, quantity, and the firm’s level of profit.
(b) (6 points) Show the equilibrium on a diagram, depicting the
demand curve, and MR and MC curves. On the same diagram, mark the
market price and quantity, and illustrate the firm’s...

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?

The market demand curve is P = 90 − 2Q, and each firm’s total
cost function is
C = 100 + 2q2.
Suppose there is only one firm in the market. Find the
market
price, quantity, and the firm’s profit.
Show the equilibrium on a diagram, depicting the demand function
D (with the vertical and horizontal intercepts), the marginal
revenue function MR, and the marginal cost function MC. On the same
diagram, mark the optimal price P, the quantity Q,...

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...

Consider a monopolist facing a market demand given by
P = 100 - 2Q
where P Is the price and Q is the quantity. The monopolist
produces the good according to the cost function
c(Q)=Q2+10
(a) Determine the profit maximizing quantity and price the
monopolist will offer in the market
(b) Calculate the profits for the monopolist.
(c) Calculate the deadweight loss due to a monopoly. Illustrate
this In a well labelled diagram.

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