A monopolist has a cost function of c(y) = y so that its marginal costs are constant at $1 per unit. It faces the following demand curve: 0, if p> 20; D(p) = {100/p if ps 20. (a) What is the profit-maximizing choice of output? (b) If the government could set a price ceiling on this monopolist in order to force it to act as a competitor, what price should they set? (c) What output would the monopolist produce if forced to behave as a competitor?

A monopolist has a cost function of c(y) = y so that its marginal costs are constant at $1 per unit. It faces the following demand curve: 0, if p> 20; D(p) = {100/p if ps 20. (a) What is the profit-maximizing choice of output? (b) If the government could set a price ceiling on this monopolist in order to force it to act as a competitor, what price should they set? (c) What output would the monopolist produce if forced to behave as a competitor?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQ

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