The Buy n Large Corporation (BnL) is a monopolist in a market with the demand function: Qd = 320 − 4p BnL’s marginal cost function is: MC = 20/Q + 4 and its average total cost function is: ATC = 240/Q + 20 + Q/8 (d) Suppose the government regulates BnL, so that they are forced to lower their price until social welfare is maximized. Determine the regulated price and quantity. (e) Draw a graph showing the demand curve, marginal revenue curve, and marginal cost curve. Label all axes and curves. Mark out all intercepts, the profit-maximizing price and quantity, and the regulated price and quantity. (f) Determine the deadweight loss caused by BnL’s market power. Use your graph to help accomplish this
The Buy n Large Corporation (BnL) is a monopolist in a market with the
Qd = 320 − 4p
BnL’s marginal cost function is:
MC = 20/Q + 4
and its
ATC = 240/Q + 20 + Q/8
(d) Suppose the government regulates BnL, so that they are forced to lower their
is maximized. Determine the regulated price and quantity.
(e) Draw a graph showing the demand curve, marginal revenue curve, and marginal cost curve. Label all
axes and curves. Mark out all intercepts, the profit-maximizing price and quantity, and the regulated
price and quantity.
(f) Determine the deadweight loss caused by BnL’s market power. Use your graph to help accomplish this
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