Question

Suppose a monopolist has TC = 40 + 10Q + Q2, and the demand curve it faces is p = 130 - 2Q. What is the Lerner index of this profit-maximizing monopolist?

Question 13 options:

	A) 0.50
	B) 0.35
	C) 0.222
	D) 0.444

The above figure shows the demand and cost curves facing a monopolist. This profit-maximizing monopoly has a revenue equal to (Hint: Solve for the MR equation)

Question 7 options:

	A) $5200.
	B) $7500.
	C) $8000.
	D) $1000.

Answer 1

Q13) option D)

Lerner index = (P-MC)/P

At eqm, MR = MC

130-4Q = 10+2Q

120 = 6Q

Q* = 20

So P* = 130-2*20 = 90

MC = 10+2*20 = 50

L = (90-50)/90

= 4/9

= .444