A single firm produces widgets, with a cost function and inverse demand function as follows, C(q) = 150 + 2q P(Qd) = 10 − 0.08Qd (a) Calculate the monopolist’s profit-maximizing price, quantity, and profit if he can charge a single price in the market (single price monopolist). (b) Suppose the firm can sell units after your answer to (a) at a lower price (2nd-degree price discrimination, timed-release). What quantity will be sold for what price in this second-tier market? Calculate the monopolist’s profit. (c) Suppose each new tier of pricing the monopolist introduces increases fixed costs by $2 (quantities can be irrational). What is the profit-maximizing quantity, number of prices, monopolist’s profit, and deadweight loss?
A single firm produces widgets, with a cost function and inverse demand function as follows,
C(q) = 150 + 2q P(Qd) = 10 − 0.08Qd
(a) Calculate the monopolist’s profit-maximizing
(b) Suppose the firm can sell units after your answer to (a) at a lower price (2nd-degree
(c) Suppose each new tier of pricing the monopolist introduces increases fixed costs by $2 (quantities can be irrational). What is the profit-maximizing quantity, number of prices, monopolist’s
(d) Suppose the firm can perfectly price discriminate (1st-degree) with a 40% increase in marginal cost; calculate the profit-maximizing quantity, monopolist’s profit, and deadweight loss?
(e) Between (c) and (d), which is socially preferred? Which would the monopolist choose to do?
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