1. Suppose that inverse demand is given by P = 100 − 1/2 Q and each firm’s marginal cost is 10. Assume fixed costs are 0. (a) Solve for equilibrium price and quantity assuming this is a monopoly market. (i.e. Sup- posing there is only one firm, with no threat of entry, find the choice of quantity that maximizes profit, and then compute the corresponding market price.) (b) At this price and quantity, what is the monopolist’s profit? (c) What is consumer surplus?
1. Suppose that inverse demand is given by P = 100 − 1/2 Q and each firm’s marginal cost is 10. Assume fixed costs are 0.
(a) Solve for
posing there is only one firm, with no threat of entry, find the choice of quantity that
maximizes profit, and then compute the corresponding market price.)
(b) At this price and quantity, what is the monopolist’s profit?
(c) What is
(d) What would be the
(e) How much is
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A monopolist maximizes profit where:
Marginal Revenue = Marginal Cost
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