Answered: Problem 3.3 A monopoly's inverse demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 3.3

A monopoly's inverse demand function is

p=160-4Q

and it has no fixed costs. Initially marginal cost is 12 (A constant MC and no fixed costs means ATC = MC, Can you prove this to yourself?). Determine the price, quantity, consumer surplus, profit, total surplus, and deadweight loss .

Expert Solution

Step 1

Demand function shows the functional relationship between Quantity demanded for a commodity and its various Determinants. The quantity demanded is inversely related to price of the products, i.e., if prices fall, the demand will increase.

here we calculate the price, quantity, consumer surplus, profit, total surplus, and deadweight loss by the following method as follow;

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