1. A monopolist faces a demand curve, Q = 100 – 5P, and a cost function TC = 2Q.(a) Solve the monopolistť's profit maximization problem. What is the optimal Q ofthe monopolist? What output price and profit does this quantity imply?(b) What is the monopolist's markup in equilibrium? Use markup to calculateelasiticity of demand at the equilibrium point.(d) Now suppose there is no price cap, and the monopolist has figured out how tosegment the market into three groups with different demand curves given bythe following equations:Q1 = 30 – PQ2 = 40 – 2PQ4 = 30 – 2P%3DWhat prices should the firm charge and what quantities should they supply toeach group? Show that the firm is better off price discriminating (comparedwith the scenario in part (a) without price discrimination).

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|1. A monopolist faces a demand curve, Q = 100 - 5P, and a cost function TC = 2Q. (a) Solve the monopolist's profit maximization problem. What is the optimal Q of the monopolist? What output price and profit does this quantity imply?

|1. A monopolist faces a demand curve, Q = 100 - 5P, and a cost function TC = 2Q. (a) Solve the monopolist's profit maximization problem. What is the optimal Q of the monopolist? What output price and profit does this quantity imply?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.2P

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