A firm is a monopoly in a protected (home) market with demand given by Q(P) = 28 – 2P. The firm's cost function is TC = 4q. The firm has a capacity of K = 20 units. %3D A. What is the profit maximizing P and q for the monopolist?

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.6P
icon
Related questions
Question

5.

 

A firm is a monopoly in a protected (home) market with demand given by Q(P) = 28 – 2P. The firm's
cost function is TC = 4q. The firm has a capacity of K = 20 units.
A. What is the profit maximizing P and q for the monopolist?
Now suppose the firm can also sell (the same product) in world the market, where the world price is
Pw = 5. In the world market the firm is a competitive firm: It assumes that it can sell any quantity in
the world market at price Pw = 5. Let qw be the quantity it sells in the world market, and let qa be the
quantity it sells in the home market.
B. What are the profit maximizing qw, and qa?
C. What is the price in the home market?
D. What is the deadweight loss? Here it is perhaps it is helpful to ask: What is the home market
quantity qa that maximizes the sum consumer surplus in the home market and the firm's
total profits (world and home market profits)?
Transcribed Image Text:A firm is a monopoly in a protected (home) market with demand given by Q(P) = 28 – 2P. The firm's cost function is TC = 4q. The firm has a capacity of K = 20 units. A. What is the profit maximizing P and q for the monopolist? Now suppose the firm can also sell (the same product) in world the market, where the world price is Pw = 5. In the world market the firm is a competitive firm: It assumes that it can sell any quantity in the world market at price Pw = 5. Let qw be the quantity it sells in the world market, and let qa be the quantity it sells in the home market. B. What are the profit maximizing qw, and qa? C. What is the price in the home market? D. What is the deadweight loss? Here it is perhaps it is helpful to ask: What is the home market quantity qa that maximizes the sum consumer surplus in the home market and the firm's total profits (world and home market profits)?
Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Depreciation
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
Microeconomic Theory
Microeconomic Theory
Economics
ISBN:
9781337517942
Author:
NICHOLSON
Publisher:
Cengage
Managerial Economics: Applications, Strategies an…
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Micro Economics For Today
Micro Economics For Today
Economics
ISBN:
9781337613064
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Economics For Today
Economics For Today
Economics
ISBN:
9781337613040
Author:
Tucker
Publisher:
Cengage Learning
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Economics:
Economics:
Economics
ISBN:
9781285859460
Author:
BOYES, William
Publisher:
Cengage Learning