Question

2. Consider the following exph (10 marks) Zoom ATC Ne The graph above shows the demand curve (D), marginal cost curve (MC), average cout exurve (AC), and marginal revenue curve (MR) for a monopolist. a) What is the profit maximizing quantity and price for the monopolist? Answer b) If this is a perfectly competitive market, what is the equilibrium quantity and price? Answer: c) What area represents the deadweight loss caused by the monopolist? Answer:

Answer 1

Answer
a)
The monopolist produces at MR=MC
where
Q=Q2
and the price it charges from the demand curve at the output level
P=P2
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b)
The market produces at MC=P
where
Q=Q4 and P=P4

c)
the deadweight loss is the area by which the total surplus decreases
DWL =area between changed quantity and demand and supply curves
=area hfc