Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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need part d
![QUESTION 3
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:
if p > 20
D(P) =
- {100/p 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3efd2f19-4f31-4dd3-8aae-904f76c1820b%2F15a617de-6448-4c36-a0b2-54015738c3ce%2Fn4p25k_processed.png&w=3840&q=75)
Transcribed Image Text:QUESTION 3
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:
if p > 20
D(P) =
- {100/p 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.
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