Consider a market with 190 consumers. Of these, 90 of them have individual (inverse) demands given by: PM(Q)=10−Q, while each of the other 100 has an individual (inverse) demand of PS(Q)=10−10Q. The cost function of the monopolist serving this market is C(Q) = 6Q - Q^2/400 . (a) Find the aggregate demand. Analyze the cost function and find what kind of returns to scale it exhibits. Compute the efficient total output (ignoring break-even constraints).(b) Compute the optimal linear price (and quantity) for this monopolist, and the deadweight loss.

(a) Aggregate demand refers to the sum total of demand of all individual. It is provided that an…

Answered: Consider a market with 190 consumers.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a market with 190 consumers. Of these, 90 of them have individual (inverse) demands given by: PM(Q)=10−Q, while each of the other 100 has an individual (inverse) demand of PS(Q)=10−10Q. The cost function of the monopolist serving this market is
C(Q) = 6Q - Q^2/400 .
(a) Find the aggregate demand. Analyze the cost function and find what kind of returns to scale it exhibits. Compute the efficient total output (ignoring break-even constraints).
(b) Compute the optimal linear price (and quantity) for this monopolist, and the deadweight loss.

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