Spike the Bulldog is the only seller of Zagopoly board games in Spokane. The inverse demand curve for this game is given by P = 40 – 0.5Q, where Q is in hundreds of games per month. Spike's marginal cost of producing board games is 7 + 0.1Q. a. If Spike cannot price-discriminate, what is his profit-maximizing level of output? What is his profit-maximizing price? b. How much consumer surplus will buyers of the board game receive? How much producer surplus will end up in Spike's pockets? How much deadweight loss is created by the board game monopoly? c. Suppose Spike is a magnificent salesman, able to discern perfectly his customers' willingness to pay. If he leverages this information to begin perfectly price discriminating, how many board games will he sell? d. How much surplus will buyers receive from a perfectly price- discriminating Spike? How much producer surplus will Spike capture? What will the deadweight loss due to monopoly be?

Spike the Bulldog is the only seller of Zagopoly board games in Spokane. The inverse demand curve for this game is given by P = 40 – 0.5Q, where Q is in hundreds of games per month. Spike's marginal cost of producing board games is 7 + 0.1Q. a. If Spike cannot price-discriminate, what is his profit-maximizing level of output? What is his profit-maximizing price? b. How much consumer surplus will buyers of the board game receive? How much producer surplus will end up in Spike's pockets? How much deadweight loss is created by the board game monopoly? c. Suppose Spike is a magnificent salesman, able to discern perfectly his customers' willingness to pay. If he leverages this information to begin perfectly price discriminating, how many board games will he sell? d. How much surplus will buyers receive from a perfectly price- discriminating Spike? How much producer surplus will Spike capture? What will the deadweight loss due to monopoly be?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.3P

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