Suppose that an ordinary monopolist faces an inverse market demand curve P = 100 - Q. Suppose that the monopoly firm’s total cost of production is TC = 20 • Q. (i)To maximize profit, what output would the firm produce, what price would the firm charge, what profit would the firm earn, and what is the “deadweight loss” in this situation? Give the numerical values for the output, price, profit and deadweight loss, showing how you determined them. (ii) Explain what we mean by ‘deadweight loss’
Suppose that an ordinary monopolist faces an inverse market demand curve P = 100 - Q. Suppose that the monopoly firm’s total cost of production is TC = 20 • Q. (i)To maximize profit, what output would the firm produce, what price would the firm charge, what profit would the firm earn, and what is the “deadweight loss” in this situation? Give the numerical values for the output, price, profit and deadweight loss, showing how you determined them. (ii) Explain what we mean by ‘deadweight loss’
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
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Suppose that an ordinary monopolist faces an inverse market demand curve P = 100 - Q. Suppose that the
monopoly firm’s total cost of production is TC = 20 • Q.
(i)To maximize profit, what output would the firm produce, whatprice would the firm charge, what profit would the firm earn, and what is the “deadweight loss ” in this situation? Give the numerical values for the output, price,profit and deadweight loss , showing how you determined them.(ii) Explain what we mean by ‘deadweight loss’.
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