1. Suppose that inverse demand is given by P = 100 − 1/2 Q and each firm’s marginal cost is 10. Assume fixed costs are 0. (a) Solve for equilibrium price and quantity assuming this is a monopoly market. (i.e. Sup- posing there is only one firm, with no threat of entry, find the choice of quantity that maximizes profit, and then compute the corresponding market price.) (b) At this price and quantity, what is the monopolist’s profit? (c) What is consumer surplus?

1. Suppose that inverse demand is given by P = 100 − 1/2 Q and each firm’s marginal cost is 10. Assume fixed costs are 0. (a) Solve for equilibrium price and quantity assuming this is a monopoly market. (i.e. Sup- posing there is only one firm, with no threat of entry, find the choice of quantity that maximizes profit, and then compute the corresponding market price.) (b) At this price and quantity, what is the monopolist’s profit? (c) What is consumer surplus?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1E: The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales...

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