The total cost (TC) of a monopolistic firm is a linear function of output (q), expressed as TC=20q. Market demand for the firm is p=100-2q.   a. Determine the monopolistic firm's profit-maximizing output and price.   b. Calculate the Lerner Index of the firm.   c. Determine the Pareto optimal level of output and price, where the sum of producer and the consumer surplus is maximal.

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
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Chapter14: Monopoly
Section: Chapter Questions
Problem 14.1P
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The total cost (TC) of a monopolistic firm is a linear function of output (q), expressed as TC=20q. Market demand for the firm is p=100-2q.

 

a. Determine the monopolistic firm's profit-maximizing output and price.

 

b. Calculate the Lerner Index of the firm.

 

c. Determine the Pareto optimal level of output and price, where the sum of producer and the consumer surplus is maximal.

 

d. Calculate the consumer surplus, producer surplus, and deadweight loss (DWL) in the monopoly case.

 

e. Calculate the loss of consumer surplus and gain of producer surplus due to the monopoly.

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