You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically. What are the profit, producer surplus and consumer surplus? The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this perfectly competitive environment, what would be the equilibrium price and quantity? Explain this in words and show it graphically. What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)? How much would you be willing to pay to keep the government from taking your monopoly away? Explain.
You have been granted a
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What is your profit maximizing
price and quantity? Explain this in words and show it graphically. -
What are the profit,
producer surplus andconsumer surplus ? -
The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this
perfectly competitive environment, what would be theequilibrium price and quantity? Explain this in words and show it graphically. -
What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)?
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How much would you be willing to pay to keep the government from taking your monopoly away? Explain.
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