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pose that the monopolist faces a linear demand curve, P(Q) = A - BQ. Further s t the monopolist has the marginal cost function: MC = Q. Find the revenue as a function of Q. Find the marginal revenue as a function of Q. Find the quantity that maximizes the monopolist's profit as a function of A and B. Find the equilibrium price as a function of A and B. Let's use some numbers. Suppose A = 10 and B= 2. Solve for the profit-maximizin quantity and price. Using A = 10 and B = 2, draw a demand curve and a marginal revenue function as marginal cost. Shade the deadweight loss. Also label clearly the profit-maximizing qua and price chosen by the monopolist. What would have been the competitive equilibrium price and quantity (hint: equate

pose that the monopolist faces a linear demand curve, P(Q) = A - BQ. Further s t the monopolist has the marginal cost function: MC = Q. Find the revenue as a function of Q. Find the marginal revenue as a function of Q. Find the quantity that maximizes the monopolist's profit as a function of A and B. Find the equilibrium price as a function of A and B. Let's use some numbers. Suppose A = 10 and B= 2. Solve for the profit-maximizin quantity and price. Using A = 10 and B = 2, draw a demand curve and a marginal revenue function as marginal cost. Shade the deadweight loss. Also label clearly the profit-maximizing qua and price chosen by the monopolist. What would have been the competitive equilibrium price and quantity (hint: equate

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 15CQ
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Question 1: - Suppose that the monopolist faces a linear demand curve, P(Q) = A - BQ. Further suppose that the monopolist has the marginal cost function: MC = Q. 1. Find the revenue as a function of Q. 2. Find the marginal revenue as a function of Q. 3. Find the quantity that maximizes the monopolist's profit as a function of A and B. 4. Find the equilibrium price as a function of A and B. 5. Let's use some numbers. Suppose A = 10 and B = 2. Solve for the profit-maximizing quantity and price. 6. Using A = 10 and B = 2, draw a demand curve and a marginal revenue function as well as marginal cost. Shade the deadweight loss. Also label clearly the profit-maximizing quantity and price chosen by the monopolist. 7. What would have been the competitive equilibrium price and quantity (hint: equate MC and the demand function)? Label the competitive equilbrium point. Also compute the size of the deadweight loss due to inefficiency casued by the monopolist behavior.
Transcribed Image Text:Question 1: - Suppose that the monopolist faces a linear demand curve, P(Q) = A - BQ. Further suppose that the monopolist has the marginal cost function: MC = Q. 1. Find the revenue as a function of Q. 2. Find the marginal revenue as a function of Q. 3. Find the quantity that maximizes the monopolist's profit as a function of A and B. 4. Find the equilibrium price as a function of A and B. 5. Let's use some numbers. Suppose A = 10 and B = 2. Solve for the profit-maximizing quantity and price. 6. Using A = 10 and B = 2, draw a demand curve and a marginal revenue function as well as marginal cost. Shade the deadweight loss. Also label clearly the profit-maximizing quantity and price chosen by the monopolist. 7. What would have been the competitive equilibrium price and quantity (hint: equate MC and the demand function)? Label the competitive equilbrium point. Also compute the size of the deadweight loss due to inefficiency casued by the monopolist behavior.
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