Question 3: Monopoly Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P = 1000 – 10Q, 1000Q – 10Q² = 1000 – 20Q Total reveпие:TR 3 Marginal Revenue:MR Marginal Cost: MC = 100 +10Q where Q indicates the number of copies sold and P is the price in Ectenian dollars. a. Find the price and quantity that maximize the company's profit. b. Find the price and quantity that would maximize social welfare. c. Calculate the deadweight loss from monopoly. d. Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options: i. a flat fee of 2,000 Ectenian dollars. ii. 50 percent of the profits. iii. 150 Ectenian dollars per unit sold. iv. 50 percent of the revenue. For each option, calculate the profit-maximizing price and quantity. Which, if any, of these compensation schemes would alter the deadweight loss from monopoly? Explain.

Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
Publisher:BOYES, William
Chapter28: Antitrust And Regulation
Section: Chapter Questions
Problem 8E
icon
Related questions
Question
Question 3: Monopoly
Based on market research, a film production company in Ectenia obtains the following
information about the demand and production costs of its new DVD:
Demand: P = 1000 – 10Q,
1000Q – 10Q²
= 1000 – 20Q
Total reveпие:TR 3
Marginal Revenue:MR
Marginal Cost: MC = 100 +10Q
where Q indicates the number of copies sold and P is the price in Ectenian dollars.
a. Find the price and quantity that maximize the company's profit.
b. Find the price and quantity that would maximize social welfare.
c. Calculate the deadweight loss from monopoly.
d. Suppose, in addition to the costs above, the director of the film has to be paid. The
company is considering four options:
i. a flat fee of 2,000 Ectenian dollars.
ii. 50 percent of the profits.
iii. 150 Ectenian dollars per unit sold.
iv. 50 percent of the revenue.
For each option, calculate the profit-maximizing price and quantity. Which, if any, of these
compensation schemes would alter the deadweight loss from monopoly? Explain.
Transcribed Image Text:Question 3: Monopoly Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD: Demand: P = 1000 – 10Q, 1000Q – 10Q² = 1000 – 20Q Total reveпие:TR 3 Marginal Revenue:MR Marginal Cost: MC = 100 +10Q where Q indicates the number of copies sold and P is the price in Ectenian dollars. a. Find the price and quantity that maximize the company's profit. b. Find the price and quantity that would maximize social welfare. c. Calculate the deadweight loss from monopoly. d. Suppose, in addition to the costs above, the director of the film has to be paid. The company is considering four options: i. a flat fee of 2,000 Ectenian dollars. ii. 50 percent of the profits. iii. 150 Ectenian dollars per unit sold. iv. 50 percent of the revenue. For each option, calculate the profit-maximizing price and quantity. Which, if any, of these compensation schemes would alter the deadweight loss from monopoly? Explain.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 6 steps with 5 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Economics:
Economics:
Economics
ISBN:
9781285859460
Author:
BOYES, William
Publisher:
Cengage Learning
Economics For Today
Economics For Today
Economics
ISBN:
9781337613040
Author:
Tucker
Publisher:
Cengage Learning
Micro Economics For Today
Micro Economics For Today
Economics
ISBN:
9781337613064
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Economics (MindTap Course List)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Microeconomics
Microeconomics
Economics
ISBN:
9781337617406
Author:
Roger A. Arnold
Publisher:
Cengage Learning