A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs 1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20. 2. Repeat question (1) under perfect competition. 3. Interpret the above results intuitively

Survey Of Economics
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ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter8: Monopoly
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A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs
%3D
1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20.
2. Repeat question (1) under perfect competition.
3. Interpret the above results intuitively
4. Take the monopoly equilibrium at MC=10. Now the government imposes a maximum price of $ 30.
Discuss the effects of this measure.
5. Instead of the maximum price, the government gives the monopoly a subsidy of $ 10, so the marginal
cost of the monopoly effectively drops to zero. Discuss the welfare effects and compare with Perfect
Competition.
Transcribed Image Text:A monopolist faces an inverse demand of P(Q) = 210 – 4Q and constant marginal costs %3D 1. Calculate the optimal price, quantity and total revenues, for MC = 10 and MC = 20. 2. Repeat question (1) under perfect competition. 3. Interpret the above results intuitively 4. Take the monopoly equilibrium at MC=10. Now the government imposes a maximum price of $ 30. Discuss the effects of this measure. 5. Instead of the maximum price, the government gives the monopoly a subsidy of $ 10, so the marginal cost of the monopoly effectively drops to zero. Discuss the welfare effects and compare with Perfect Competition.
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