A monopolist faces the following aggregate demand function: Q = 28 - 1/2 P. Total production costs for the firm are TC(Q) = 40Q. Calculate the consumer surplus, producer surplus, and profits in equilibrium. Then, suppose that the monopolist decides to spend 10 to purchase a patent that would allow her to decrease total costs by 4 per unit. Find the new equilibrium quantity, price, new consumer surplus, producer surplus, and profits to the monopolist after the purchase of the patent.

A monopolist faces the following aggregate demand function: Q = 28 - 1/2 P. Total production costs for the firm are TC(Q) = 40Q. Calculate the consumer surplus, producer surplus, and profits in equilibrium. Then, suppose that the monopolist decides to spend 10 to purchase a patent that would allow her to decrease total costs by 4 per unit. Find the new equilibrium quantity, price, new consumer surplus, producer surplus, and profits to the monopolist after the purchase of the patent.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Monopoly

Section: Chapter Questions

Problem 7SQP

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Question

A monopolist faces the following aggregate
demand function: Q = 28 – 1/2 P. Total
production costs for the firm are TC(Q) = 40Q.
Calculate the consumer surplus, producer
surplus, and profits in equilibrium. Then,
suppose that the monopolist decides to
spend 10 to purchase a patent that would
allow her to decrease total costs by 4 per unit.
Find the new equilibrium quantity, price, new
consumer surplus, producer surplus, and
profits to the monopolist after the purchase of
the patent.

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