A monopolist can produce at constant average and marginal costs of AC = MC = 5. The firm faces a market demand curve given by Q = 55 – P. (a) Calculate the profit-maximizing price-quantity combination for the monopolist. Also calculate the monopolist’s profits. Graph the relevant functions to illustrate these. (b) What output level would be produced by this industry under perfect competition (where price = marginal cost)? Indicate this on the graph. (c) Calculate the consumer surplus obtained by consumers in case (b). Show that this exceeds the sum of the monopolist’s profits and the consumer surplus received in case (a). What is the value of the deadweight loss from monopolisation? Indicate these on the graph. Please can you help with the graph, kind regards
A monopolist can produce at constant average and marginal costs of AC =
MC = 5. The firm faces a market demand curve given by Q = 55 – P.
(a) Calculate the profit-maximizing
monopolist. Also calculate the monopolist’s profits. Graph the relevant
functions to illustrate these.
(b) What output level would be produced by this industry under
competition
(c) Calculate the consumer surplus obtained by consumers in case (b).
Show that this exceeds the sum of the monopolist’s profits and the
consumer surplus received in case (a). What is the value of the
Please can you help with the graph, kind regards
Step by step
Solved in 3 steps with 1 images
