Question

02 Question (5 points) 1st attempt Part 1 (2 points) Feedback O See Hint A monopolist has a cost function given by c(y) = y2 and faces an inverse demand curve given by P(y) = 120.00 – y, where P is the per-unit price and yis the quantity of output sold. Assume this monopolist cannot discriminate and charges a single price. What is the profit-maximizing level of output? * 120 What is its profit-maximizing price? * $ 120 Part 2 (2 points) Feedback See Hint Assume you want to choose a price ceiling for this monopolist so as to maximize total surplus (consumer surplus + producer surplus). What price ceiling level should you choose? * $ 120 What quantity would be produced at this price ceiling? Ⓡ 120 Dart 2 11 nointi Feedback O See Hint

Answer 1

pant 1 мл. I monopolist has a cost function ely)=43 and faes an inuuse de mard cave given by : pcy )= 120.00- y Now total revene TRCY) = Ply). y = 120.00 y - y2 ime reve me MRCY) = d CTRLY) - 120.00 - 24 dy Now cost fiction ely) = yg Marginal cost. Mc (y) := acly) = 342 24 Now, profit manumising condition for the monopolist Scanned with * CamScanmely) - Mecy)

20 120.00-2y = 24 -) -44 = - 120.00 : : ya .30.00 puce will ber Ply) = 120.00-y 2 120.00 – 30.00 . 90:00 output Huce, profit - manimising level of = 30.00 Robid - manimizing pice = [90.00 part 2 How to manimize total suiplus, efficient outcome. should be produced and effüncy. condition will be Ply) = Mecy 2) 120.00-y= 24 :.=) – 3y = - 120.00 - y = 40.00 I now at y=40.00 mccy)=zy. =(2x4000) = $ 80.00 Scanned with CamScanner

Hunce What is you choose? Price ceiling = $ leve should 80.007 What quantity would be produced at this puce ecilings = 40.00 MW Part 3 subpose that you put a fan on the monopolist of $20pm mit now. Now afto tae mo maqinal. cost or Mécy)=(24 +20) Now monopolist's profit manimising condition will be MRCY) - Melly) =) 120.00-2y = ( 24720) -.4 y = - 100 =) y = 25 mits : tuce now the profit manimising level of out but Uw [25] Scanned with CamScanner