3. Think about a monopolist, the market demand function is: QD = 100/P?, the monopolist's cost function is: C(Q) = 2Q, %3D %3D dQp/Qp а. Based on the definition of price elasticity of demand: ep,p = what is the dP/P price elasticity of the market demand curve in this case? b. What is the monopolist's optimal price based on the inverse elasticity rule? c. If the government decide to impose a $1 per unit tax on the output, please use the inverse elasticity rule to decide if the monopolist's optimal price will increase more than $1 after the tax
3. Think about a monopolist, the market demand function is: QD = 100/P?, the monopolist's cost function is: C(Q) = 2Q, %3D %3D dQp/Qp а. Based on the definition of price elasticity of demand: ep,p = what is the dP/P price elasticity of the market demand curve in this case? b. What is the monopolist's optimal price based on the inverse elasticity rule? c. If the government decide to impose a $1 per unit tax on the output, please use the inverse elasticity rule to decide if the monopolist's optimal price will increase more than $1 after the tax
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter13: Antitrust And Regulation
Section: Chapter Questions
Problem 10SQP
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Transcribed Image Text:3. Think about a monopolist, the market demand function is: QD = 100/P?, the
monopolist's cost function is: C(Q) = 2Q,
%3D
%3D
dQp/Qp
а.
Based on the definition of price elasticity of demand: ep,p =
what is the
dP/P
price elasticity of the market demand curve in this case?
b. What is the monopolist's optimal price based on the inverse elasticity rule?
c. If the government decide to impose a $1 per unit tax on the output, please use the
inverse elasticity rule to decide if the monopolist's optimal price will increase more
than $1 after the tax
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