A monopolist has a cost function given by C(y)=y2 and faces a demand curve given by P(y) = 120-y. a) What is the profit maximising level of output and the price that the monopolist will charge? Show your calculations. b) If you impose a lump sum tax of £100 on this monopolist, what will be the impact on output? Explain your calculations and the intuition behind your result. c) If you wanted to choose a price ceiling for this monopolist so as to maximise consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling? Explain your calculations.
A monopolist has a cost function given by C(y)=y2 and faces a demand curve given by P(y) = 120-y. a) What is the profit maximising level of output and the price that the monopolist will charge? Show your calculations. b) If you impose a lump sum tax of £100 on this monopolist, what will be the impact on output? Explain your calculations and the intuition behind your result. c) If you wanted to choose a price ceiling for this monopolist so as to maximise consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling? Explain your calculations.
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
Related questions
Question
- A monopolist has a cost function given by C(y)=y2 and faces a demand curve given by P(y) = 120-y.
a) What is the profit maximising level of output and the price that the monopolist will charge? Show your calculations.
b) If you impose a lump sum tax of £100 on this monopolist, what will be the impact on output? Explain your calculations and the intuition behind your result.
c) If you wanted to choose a
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
- Suppose that you impose a specific tax of £20 per unit of output. What will be the monopolist’s profit maximising level of output? Explain your derivation and comment on the impact on output.
Solution
by Bartleby ExpertKnowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning