What if a price ceiling of $100 is imposed on the demand curve above? (Q = 1000 - 4P; TC = 50Q). How much does the monopolist earn?
$20,000 |
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$30,000 |
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$40,000 |
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$50,000 |
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$60,000 |
Q = 1000 - 4P
4P = 1000-Q
P = 250 - 0.25 Q
So, MR = 250 - 0.5Q { MR has double slope of demand}
Monoplist will produce where MR = MC
Here, MC = d(TC)/dQ = 50
MR = MC
250 - 0.5Q = 50
250 - 50 = 0.5Q
200 = 0.5Q
Q = 400
P = 250 - 0.25*400 = 150 { which is above the price ceiling}
So, at price $100
Q = 1000 - 4*100= 600
TC = 50*600 = 30000
TR = Q*P = 60000
Monopolist will earn = 60000 - 30000
= 30000
Ans is $30,000
What if a price ceiling of $100 is imposed on the demand curve above? (Q =...
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