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Suppose that a monopolist's market demand is given by P = 100 - 2Q and that marginal cost is given by MC = Q/2, while the marginal revenue is MR = 100 – 4Q. Assume the firm has no fixed costs. a) Calculate the profit-maximizing monopoly price and quantity. b) Calculate the price and quantity that arise under perfect competition with a supply curve P = Q/2. c) Compare consumer and producer surplus under monopoly versus perfectly competitive pricing. What is the deadweight loss due to monopoly? d) Explain in a sentence or two what the deadweight loss represents in terms of consumers' willingness to pay compared to the cost of production.

Suppose that a monopolist's market demand is given by P = 100 - 2Q and that marginal cost is given by MC = Q/2, while the marginal revenue is MR = 100 – 4Q. Assume the firm has no fixed costs. a) Calculate the profit-maximizing monopoly price and quantity. b) Calculate the price and quantity that arise under perfect competition with a supply curve P = Q/2. c) Compare consumer and producer surplus under monopoly versus perfectly competitive pricing. What is the deadweight loss due to monopoly? d) Explain in a sentence or two what the deadweight loss represents in terms of consumers' willingness to pay compared to the cost of production.

Survey Of Economics
Survey Of Economics
10th Edition
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
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Suppose that a monopolist's market demand is given by P = 100 - 2Q and that marginal cost is given by MC = Q/2, while the marginal revenue is MR = 100 – 4Q. Assume the firm has no fixed costs. a) Calculate the profit-maximizing monopoly price and quantity. b) Calculate the price and quantity that arise under perfect competition with a supply curve P = Q/2. c) Compare consumer and producer surplus under monopoly versus perfectly competitive pricing. What is the deadweight loss due to monopoly? d) Explain in a sentence or two what the deadweight loss represents in terms of consumers' willingness to pay compared to the cost of production.
Transcribed Image Text:Suppose that a monopolist's market demand is given by P = 100 - 2Q and that marginal cost is given by MC = Q/2, while the marginal revenue is MR = 100 – 4Q. Assume the firm has no fixed costs. a) Calculate the profit-maximizing monopoly price and quantity. b) Calculate the price and quantity that arise under perfect competition with a supply curve P = Q/2. c) Compare consumer and producer surplus under monopoly versus perfectly competitive pricing. What is the deadweight loss due to monopoly? d) Explain in a sentence or two what the deadweight loss represents in terms of consumers' willingness to pay compared to the cost of production.
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