Question

Monopoly - End of Chapter Problem 6. Consider the accompanying demand schedule for diamonds. The marginal cost of producing diamonds is constant at $100. There is no fixed cost. Price of Quantity of diamonds diamond demanded $500 0 400 300 2 200 100 4 0 1 زرا 5 a. If De Beers charges $300 for a diamond, calculate total consumer surplus by summing individual consumer surpluses. How large is producer surplus? Consumer surplus: $ Producer surplus: $ Suppose that upstart Russian and Asian producers enter the market, and it becomes perfectly competitive. b. What is the perfectly competitive price? What quantity will be sold in this perfectly competitive market? Competitive price: $ Quantity sold: diamonds

Answer 1

5 ron 400+ A Price no 2007 B MC 100 2 4 quantity Consumer surplus (A) → 1 x 2 x (500-300) +200 produces suspens (B) (300-100)+(2-0) 400. (6) Peegickly competitive pecice (P=MC) Competitive price quantity sold 2 units. Consumer surplus (A+B+C) IX 1500-100) x4 - 2 x 4 UOxy Boo proan Suche surpeus. Leso (Because MC = ATC) (d) Dead weight loss (c) £x (800-100)x (4-2) - 1 x 200 x 2 400