Question

Tuscaloosa Cable is a monopolist who has sole authority to operate in Tuscaloosa. The demand and marginal revenue curves that thi monopolist face is given by P - 250 - Q and MR=250-26, respectively. Marginal cost is $50 a. What is the profit maximizing quantity that the monopolist will supply? b. What price will the profit maximizing quantity be sold for in the market? c. Calculate the Lerner Index for this monopolist (If your answer has decimals, round to TWO DECIMAL PLACES): d. What would have been the market price and quantity if this was a perfectly competitive industry? i. Price: ii. Quantity:

Answer 1

Demand curve: P = 2.50 - 8 MR = 250-2Q MC- 50 For Profit raaximization A Monopolist Would produce at MREMC 250-22:50 09=100 → P= 250-100 P=250-Q => p*= 150 a) Hence Profil 199x. Quantity wat 190 nopolist would Supply is n =100) cb) Price charged for profil- max. Quantity would be Preis (cc) Lesner's guden for a gonopoly to given by. ما Lesner's guder = P-MC Р Lesnei's Judex = 150-50 50-66, 150

acts gu Pertakess (d) They operate competitie Judecal estiny firms aut P=MC 250-Q = 50 => a = 200 la pt p*= 50 i cis (i) Price - 50 (11) quantity : 200