Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 14.A, Problem 4QE

a)

To determine

The profit maximizing level of price and output for a monopolist.

b)

To determine

The profit maximizing level of price and output for a competitive industry.

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The market demand curve is Q = 500 - 10P. The total cost function for the entire market is 400 + 10Q.   (a) Calculate the price and quantity if this market is perfectly competitive.   (b) Calculate the price, quantity and profit if this market is a monopoly. Calculate the price elasticity for the monopolist.
A monopolist sells output for $4.00 per unit at the current level of production. At this level of output, the marginal cost is $3.00, average variable costs are $3.75, and average total costs are $4.25. The marginal revenue is $3.00. What is the short-run condition for the monopolist and what output changes would you recommend?
a) A monopolist's marginal cost is MC = 5 and its demand curve is P = -5Q+ 25. Calculate the monopolist's price (PM) and quantity (Qm). b) Suppose the government regulates this monopoly and requires it to price like a competitive firm (i.e., set P=MC). Calculate the monopolist's regulated price (P,) and the quantity (Q.) it would produce under regulation. c) Solve the problem graphically. Graph the monopolist's demand curve, marginal revenue curve, and marginal cost curve. Indicate P, Q, Pr, and Q.. d) On the graph, identify the area which represents the deadweight loss (DWL). e) Calculate the value of the monopolist's deadweight loss.
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