Consider a monopolist that produces coal for energy, with demand curve defined by P= 190 - 20 and marginal cost given by MC - 10 + 20. Also, the firm's average total cost is ATC = 100/Q +Q + 10. (Price and costs are in dollars per tonne of coal, while quantity is in thousands of tonnes.) a. Calculate the monopolisť's profit-maximizing quantity, price, and profit. For a monopoly, profit maximization occurs where the marginal revenue equals the marginal cost. b. What would be the competitive output and price if this monopolist operated as a competitive firm? c. Calculate the consumer surplus and producer surplus in this market. For the producer surplus, you must use both the Method by Definition and Variable Cost Method discussed in class, in order to
Consider a monopolist that produces coal for energy, with demand curve defined by P= 190 - 20 and marginal cost given by MC - 10 + 20. Also, the firm's average total cost is ATC = 100/Q +Q + 10. (Price and costs are in dollars per tonne of coal, while quantity is in thousands of tonnes.) a. Calculate the monopolisť's profit-maximizing quantity, price, and profit. For a monopoly, profit maximization occurs where the marginal revenue equals the marginal cost. b. What would be the competitive output and price if this monopolist operated as a competitive firm? c. Calculate the consumer surplus and producer surplus in this market. For the producer surplus, you must use both the Method by Definition and Variable Cost Method discussed in class, in order to
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter6: Consumer Choices
Section: Chapter Questions
Problem 14CTQ: The rules of politics are not always the same as the rules of economics. In discussions of setting...
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