For the next five questions, consider a monopolist. Suppose the monopolist faces
ID: 1126924 • Letter: F
Question
For the next five questions, consider a monopolist. Suppose the monopolist faces the following demand curve: P = 100 – 3Q. Marginal cost of production is constant and equal to $10, and there are no fixed costs. What is the monopolist’s profit maximizing level of output?
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Question 112 pts
What price will the profit maximizing monopolist charge?
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Question 122 pts
How much profit will the monopolist make if she maximizes her profit?
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Question 132 pts
What is the value of consumer surplus?
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Question 142 pts
What is the value of the deadweight loss created by this monopoly?
Q = 10Explanation / Answer
Q111
Answer
the firm produces at MR=MC
MR=100-6Q.......MR curve is double sloped than demand curve
equating both
100-6Q=10
Q=15
Option second
Q112
P=100-3*15
=55
Option Second
Q122
Answer
Profit=(P-ATC)*Q
=(55-10)*15..........the MC=ATC
=675
option second
Q132
Answer
Consumer surplus is the area above price and below demand curve
=0.5*(100-55)*15
=337.5
option fourth
Q142
Answer
The efficient production is at MC=P
equating both
100-3Q=10
Q=30
P=10
Deadweight loss=0.5*(difference between quantities)*(difference between prices)
=0.5*(30-15)*(55-10)
=337.5
option fifth