1. A monopolist has a cost function given by C(y)=y² and faces a demand curve given by P(y) = 120-y. (c) If you wanted to choose a price ceiling for this monopolist so as to maximise consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling? Explain your calculations. (d) Suppose that you impose a specific tax of £20 per unit of output. What will be the monopolist's profit maximising level of output? Explain your derivation and comment on the impact on output.

1. A monopolist has a cost function given by C(y)=y² and faces a demand curve given by P(y) = 120-y. (c) If you wanted to choose a price ceiling for this monopolist so as to maximise consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling? Explain your calculations. (d) Suppose that you impose a specific tax of £20 per unit of output. What will be the monopolist's profit maximising level of output? Explain your derivation and comment on the impact on output.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 14E

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