A monopolist faces a demand of D(P) = 400−(1/5)P and constant marginal costs: TC(Q) = 1,000Q. 1. Calculate the optimal price, quantity and total profit of the monopolist. 2. Derive the dead weight loss created by the monopolist and illustrate graphically. 3. Repeat questions 1) and 2) but now assume that the market is perfectly competitive (marginal cost pricing)

Question

A monopolist faces a demand of D(P) = 400−(1/5)P and constant marginal costs: TC(Q) = 1,000Q.

1. Calculate the optimal price, quantity and total profit of the monopolist.

2. Derive the dead weight loss created by the monopolist and illustrate graphically.

3. Repeat questions 1) and 2) but now assume that the market is perfectly competitive (marginal cost pricing)

4. Take the monopoly case (as in 1) and 2). Now the government imposes a maximum price of $1250. Discuss the (welfare) effects of this measure.

5. Still in the monopoly case, assume that, instead of the maximum price, the government gives producers a per unit subsidy of $1,000. Discuss the welfare effects of this measure.

6. Suppose the market is perfectly competitive—as in 3)— and the government gives producers a per unit subsidy of $1,000. What is the welfare effect of this subsidy? Compare your answer with 5).

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Economics

Market hypothesis

Related Economics Q&A

Find answers to questions asked by students like you.

Q: (a) Why does the labour demand curve slope downwards? (b) A garment factory’s production function is...

A: a) Downward sloping of labor demand curve can be explained with the law of diminishing returns. Hiri...

Q: a. Is a typical AD curve downward sloping? Explain your answer. b. Suppose an economy is at the shor...

A:   Meaning of Aggregate Demand: The term demand refers to the willingness of an individual to purchas...

Q: According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflati...

A: The macroeconomic theories indulge in bringing up new and non-used concepts of the economy at a larg...

Q: QUESTION A Prepare a line graph comparing the unemployment rate for 2009 – 2018 between the Bahamas ...

A: Click to see the answer

Q: 45 60 70 75 (Ref 21-2 Table: Production Function for Soybeans) Use Table 21-2: Production Function f...

A: Fixed cost is defined as that part of the total cost that doesn’t depend on output level. There will...

Q: 1. Suppose the total cost to a firm of producing a quantity q of some commodity is C(q) = 490 + 20q ...

A: Given: C(q) = 490 + 20q + 0.1q2 To find out marginal cost i.e. MC(q), take the first order derivativ...

Q: Draw Philips Curve and explain the figure by using the theory of Philips Curve.

A: Draw Philips Curve and explain the figure by using the theory of Philips Curve. The Phillips curve s...

Q: Please answer using the methods or patterns of comparison. Thank You!

A: Land Route: First cost of cable is calculated as follows. First cost of cable=40,000×10=400,000 Annu...

Q: Demand for Orange Juice is given as   Qd = 5000 – 2500 P + 1200 I + 650 E – 255 Ps Suppose Income i...

A: We have demand for orange juice, Qd = 5000 – 2500 P +1200 I +650 E – 255 Ps a) If I =Rs. 500, E = 55...

Q: Can you think of an industry (or product) with near-infinite elasticity of supply in the short term?...

A: Near infinite elasticity of supply means that a small change in price leads to a large change in qua...

Q: Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price...

A: Cross price elasticity refers to the responsiveness of the quantity demand due to change in the pric...

Q: Q) In the country of Kwaki, people fish for salmon and grow corn. In one year they fished $35 millio...

A: Click to see the answer

Q: Let’s assume that a country in the Caribbean reports the following labour statistical data to its ci...

A: c) Employment to Population ratio = Number of people employed / working age population = 132700/2109...

Q: Mr Brown has recently been retrenched. The firm he worked for had to retrencha number of staff due t...

A: Structural Unemployment occurs due to mismatch of skills between the skills possessed by the workers...

Q: Explain, with the aid of a graph, the effect on the rand/dollar exchange rate and the equilibrium qu...

A: The exchange rate communicates the bilateral price of the foreign currency in terms of the home curr...

Q: Q27 How are the following three questions related: 1) Do all demand curves slope downward? 2) How do...

A: Macroeconomics is the study of whole or aggregate things. For example, Macroeconomics studies the ge...

Q: A multi-plex theatre area is experiencing a decline in the number of tickets sold, falling revenues,...

A: Click to see the answer

Q: Question 6 If the money multiplier is 3.5, a $10 billion increase in the monetary base Select one: a...

A: Given, money multiplier = 3.5 Monetary base = $10 billion  

Q: The covid 19 pandemic impacted the market for masks. How was it impacted? Discuss and Give examples

A: The face masks market is grown during the covid-19 due to the increased demand for masks in the mark...

Q: 36. The marginal cost curve intersects the average fixed, average variable, and average total cost c...

A: Answer to the question is as follows:

Q: Experiments suggest that subjects in centipede games would (A) always stop the game in the fifirst r...

A: Click to see the answer

Q: Question No.4          a) The U.S. currently has seven federal income tax brackets, with rates of 10...

A: Click to see the answer

Q: (Show the cashflow diagram if needed) A project is estimated to cost P100,000, lasts 8 years, and ha...

A: Cash flow: Income is the net measure of money and money reciprocals being moved into and out of a bu...

Q: 3.1 Labor market equilibrium occurs at a real wage at which the quantity demanded for labor equals t...

A: Labor demand curve depicts the relationship between wage and labor demanded. 

Q: 29. The above table shows the short-run total product schedule for the campus book store. When the f...

A: Marginal productivity of labour measures the change in total productivity with an additional unit of...

Q: The monetary transmission mechanism can be depicted in the form of a graph or using symbols. Explain...

A: The monetary transmission mechanism can be defined as the mechanism through which demand of the econ...

Q: 1) Large current account deficits imply large financial account surpluses. True Or False?Explain.

A: The current account deficit implies that the value of product and services a country imports exceeds...

Q: how to maximize profit in monopoly, competitive market, oligopoly and monopolistic competition?

A: Monopoly is a form of market where there is a single seller in the market. This seller is a price ma...

Q: In view of the large adverse impact of COVID-19 on the world economy, many governments have implemen...

A: The condition when the government expenditure exceeds the revenues, it brings a deficit in the econo...

Q: 32. A decrease in the price of a fixed factor of production decreases total cost and A. decreases ...

A: (32) A decrease in the price of a fixed factor of production decreases total cost and A. decreases...

Q: a. Is a typical AD curve downward sloping? Explain your answer. b. Suppose an economy is at the shor...

A:   Meaning of Aggregate Demand: The term aggregate demand refers to the situation under which the qua...

Q: Explain, with the aid of a graph, the demand‐pull inflation. In your answer, consider the following:...

A: Inflation is defined as an increase in the general price level of an economy. The main causes of inf...

Q: Is a monopoly always undesirable? Support your answer with a diagram.

A: Click to see the answer

Q: Question 3 (a) Why does the labour demand curve slope downwards? (b) A garment factory’s production ...

A: Given: To Find: Why does the labor demand curve slope downwards: The wage rate is $1,000 a week, h...

Q: The monetary transmission mechanism can be depicted in the form of a graph or using symbols. Explain...

A: The monetary transmission mechanism is the process which explains how monetary policy decisions affe...

Q: Question 4 Using your knowledge and understanding of supply and demand analysis to graph the followi...

A: Assume in the labor market, the equilibrium occurs where the demand curve for labor (D) intersects t...

Q: 39. A perfectly competitive firm maximizes its profit by producing the level of output so that its a...

A: In a perfectly competitive industry there are large number of firms selling identical products.