A monopolist faces market demand Q = 30 - P, and has a marginal cost curve equal to MC = Q. I have computed the marginal revenue curve fro you which is given by MR = 30 - 2Q. 1. If the firm is a single price monopolist, find the profit maximizing price and quantity and the resulting profit to the monopoly. 2. What is the socially optimal price and quantity? What is the firm's profit at this price and quantity? 3. Show (1) and (2) on a graph.
A monopolist faces market demand Q = 30 - P, and has a marginal cost curve equal to MC = Q. I have computed the marginal revenue curve fro you which is given by MR = 30 - 2Q. 1. If the firm is a single price monopolist, find the profit maximizing price and quantity and the resulting profit to the monopoly. 2. What is the socially optimal price and quantity? What is the firm's profit at this price and quantity? 3. Show (1) and (2) on a graph.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.1P
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Transcribed Image Text:A monopolist faces market demand Q = 30 - P, and has a marginal cost curve equal
to MC = Q. I have computed the marginal revenue curve fro you which is given by
MR = 30 - 2Q.
1. If the firm is a single price monopolist, find the profit maximizing price and
quantity and the resulting profit to the monopoly.
2. What is the socially optimal price and quantity? What is the firm's profit at
this price and quantity?
3. Show (1) and (2) on a graph.
4. Calculate consumer surplus (CS) and producer surplus (PS) and total surplus
for parts (1) and (2). Show CS, PS, and DWL on the graph. Calculate the DWL
due to monopoly.
5. If the firm engages in first degree price discrimination, find the profit
maximizing quantity and the resulting profit to the monopoly.
6. Between (1) and (5), which pricing scheme is preferred by the monopolist and
which by the consumers? why?
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