A monopolist's cost function yields constant average and marginal costs, with AC MC 5. The firm faces a market demand curve given by P = 53 - Q, which implies that the marginal revenue curve (derived using calculus) is MR = 53 - 2Q. a. Set MR MC and solve for the monopolist's profit maximizing output. This output is Q and the associated price is P =| The monopolist's profit equals Consumer surplus equals(you have to compute the area of a triangle to get surplus). Social surplus (consumer surplus plus profit) equals llustrate your answers by drawing a diagram on a piece of paper. and the associated price is P = b. Now, using the P MC rule, find the socially optimal output and price. The socially optimal output is Q= The Consumer surplus equals Illustrate your answers in a new diagram monopolist's profit equals Social surplus equals c. Compare total surplus from parts (a) and (b). Society losesbecause of monopolization of the market, which equals the deadweight loss d. Suppose the monopolist were required to charge an even lower price than in part (b), equal to 3. In this case, output is Q and the monopolist's profit equals Social surplus equalsIs charging the lower price a good idea from society's point of view? Consumer surplus equals negative O A. no О В. уes
A monopolist's cost function yields constant average and marginal costs, with AC MC 5. The firm faces a market demand curve given by P = 53 - Q, which implies that the marginal revenue curve (derived using calculus) is MR = 53 - 2Q. a. Set MR MC and solve for the monopolist's profit maximizing output. This output is Q and the associated price is P =| The monopolist's profit equals Consumer surplus equals(you have to compute the area of a triangle to get surplus). Social surplus (consumer surplus plus profit) equals llustrate your answers by drawing a diagram on a piece of paper. and the associated price is P = b. Now, using the P MC rule, find the socially optimal output and price. The socially optimal output is Q= The Consumer surplus equals Illustrate your answers in a new diagram monopolist's profit equals Social surplus equals c. Compare total surplus from parts (a) and (b). Society losesbecause of monopolization of the market, which equals the deadweight loss d. Suppose the monopolist were required to charge an even lower price than in part (b), equal to 3. In this case, output is Q and the monopolist's profit equals Social surplus equalsIs charging the lower price a good idea from society's point of view? Consumer surplus equals negative O A. no О В. уes
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Part A, B, C
Transcribed Image Text:A monopolist's cost function yields constant average and marginal costs, with AC MC 5. The firm faces a market demand curve given by P = 53 - Q, which implies
that the marginal revenue curve (derived using calculus) is MR = 53 - 2Q.
a. Set MR
MC and solve for the monopolist's profit maximizing output. This output is Q
and the associated price is P =| The monopolist's profit equals
Consumer surplus equals(you have to compute the area of a triangle to get surplus). Social surplus (consumer surplus plus profit) equals
llustrate your
answers by drawing a diagram on a piece of paper.
and the associated price is P =
b. Now, using the P MC rule, find the socially optimal output and price. The socially optimal output is Q=
The
Consumer surplus equals
Illustrate your answers in a new diagram
monopolist's profit equals
Social surplus equals
c. Compare total surplus from parts (a) and (b). Society losesbecause of monopolization of the market, which equals the deadweight loss
d. Suppose the monopolist were required to charge an even lower price than in part (b), equal to 3. In this case, output is Q
and the monopolist's profit equals
Social surplus equalsIs charging the lower price a good idea from society's point of view?
Consumer surplus equals
negative
O A. no
О В. уes
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