D. Based on the information in parts A - C, find the consumer-, producer-, and social surpluses before and after the government intervention.

ENGR.ECONOMIC ANALYSIS
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Author:NEWNAN
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Chapter1: Making Economics Decisions
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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.
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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