With a marginal cost of MC = 10, the profit-maximizing quantity and price is MR = 50 - 2Q = 10 Q = 20 P = 50 - Q = 50 - 20 = 30 So, the profit-maximizing quantity is 20, and the profit-maximizing price is $30. To calculate the price elasticity of demand at this point, we can use the Lerner index again: Lerner Index = (P - MC) / P = (30 - 10) / 30 = .67 The price elasticity of demand is the inverse of the Lerner index: Price Elasticity of Demand = 1 / e = 1 / (.67) = 1.5 The amount of deadweight loss associated with this monopoly is ? Deadweight Loss = ?
With a marginal cost of MC = 10, the profit-maximizing quantity and price is MR = 50 - 2Q = 10 Q = 20 P = 50 - Q = 50 - 20 = 30 So, the profit-maximizing quantity is 20, and the profit-maximizing price is $30. To calculate the price elasticity of demand at this point, we can use the Lerner index again: Lerner Index = (P - MC) / P = (30 - 10) / 30 = .67 The price elasticity of demand is the inverse of the Lerner index: Price Elasticity of Demand = 1 / e = 1 / (.67) = 1.5 The amount of deadweight loss associated with this monopoly is ? Deadweight Loss = ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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With a marginal cost of MC = 10, the profit-maximizing quantity and
MR = 50 - 2Q = 10 Q = 20
P = 50 - Q = 50 - 20 = 30
So, the profit-maximizing quantity is 20, and the profit-maximizing price is $30.
To calculate the
Lerner Index = (P - MC) / P = (30 - 10) / 30 = .67
The price elasticity of demand is the inverse of the Lerner index:
Price Elasticity of Demand = 1 / e = 1 / (.67) = 1.5
The amount of
Deadweight Loss = ?
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