A monopolist has a cost function of c(x) = x so that its marginal cost is constant at $1 per unit. It faces the following demand curve: D(P) = { 100/p 100/p if p > 20 if p ≤ 20 A. What is the profit-maximizing choice of output/price for the monopolist? Graphically represent the monopoly market. B. If the government sets a price ceiling on the monopolist in order to force it to act as a competitor, what price should the government set? C. What output would the monopolist produce if forced to behave as a competitor? D. Based on the information in parts A-C, find the consumer-, producer-, and social surpluses before and after the government intervention.

A monopolist has a cost function of c(x) = x so that its marginal cost is constant at $1 per unit. It faces the following demand curve: D(P) = { 100/p 100/p if p > 20 if p ≤ 20 A. What is the profit-maximizing choice of output/price for the monopolist? Graphically represent the monopoly market. B. If the government sets a price ceiling on the monopolist in order to force it to act as a competitor, what price should the government set? C. What output would the monopolist produce if forced to behave as a competitor? D. Based on the information in parts A-C, find the consumer-, producer-, and social surpluses before and after the government intervention.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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