A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs%3D1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20.2. Repeat question (1) under perfect competition.3. Interpret the above results intuitively4. Take the monopoly equilibrium at MC=10. Now the government imposes a maximum price of $ 30.Discuss the effects of this measure.5. Instead of the maximum price, the government gives the monopoly a subsidy of $ 10, so the marginalcost of the monopoly effectively drops to zero. Discuss the welfare effects and compare with PerfectCompetition.

P= 210-4Q TR= P×Q = (210-4Q)Q MR = dTR/dQ = 210-8Q

A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs 1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20. 2. Repeat question (1) under perfect competition. 3. Interpret the above results intuitively

A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs 1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20. 2. Repeat question (1) under perfect competition. 3. Interpret the above results intuitively

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs
%3D
1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20.
2. Repeat question (1) under perfect competition.
3. Interpret the above results intuitively
4. Take the monopoly equilibrium at MC=10. Now the government imposes a maximum price of $ 30.
Discuss the effects of this measure.
5. Instead of the maximum price, the government gives the monopoly a subsidy of $ 10, so the marginal
cost of the monopoly effectively drops to zero. Discuss the welfare effects and compare with Perfect
Competition.

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