A monopolist faces the demand curve P= 11 - Q, where Pis measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $6 per unit. a- Draw the average and marginal revenue curves and the average and marginal cost curves. What are the monopolist's profit-maximizing price and quantity? What is the resulting profit? Calculate the firm's degree of monopoly power using the Lerner index. b-A government regulatory agency sets a price ceiling of $7 per unit. What quantity will be produced, and what will the firm's profit be? What happens to the degree of monopoly power? <- What price ceiling yields the largest level of output? What is that level of output? What is the firm's degree of monopoly power at this price?

A monopolist faces the demand curve P= 11 - Q, where Pis measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $6 per unit. a- Draw the average and marginal revenue curves and the average and marginal cost curves. What are the monopolist's profit-maximizing price and quantity? What is the resulting profit? Calculate the firm's degree of monopoly power using the Lerner index. b-A government regulatory agency sets a price ceiling of $7 per unit. What quantity will be produced, and what will the firm's profit be? What happens to the degree of monopoly power? <- What price ceiling yields the largest level of output? What is that level of output? What is the firm's degree of monopoly power at this price?

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

am. 110.

A monopolist faces the demand curve P= 11 - Q, where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $6 per
unit.
a- Draw the average and marginal revenue curves and the average and marginal cost curves. What are the monopolist's profit-maximizing price and quantity? What is the
resulting profit? Calculate the firm's degree of monopoly power using the Lerner index.
b- A government regulatory agency sets a price ceiling of $7 per unit. What quantity will be produced, and what will the firm's profit be? What happens to the degree of
monopoly power?
c- What price ceiling yields the largest level of output? What is that level of output? What is the firm's degree of monopoly power at this price?

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Step 1: Define a Monopoly

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Step 2: Find the curves and the optimal point for monopoly

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Step 3: Find the profit of Monopoly

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Step 4: Find Lerner Index

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