Question

Part E-H

Assume a profit-maximizing monopolist faces a market demand given by P = (12,000 – 90Q)/100 and long run total and marginal cost given by LRTC = 5Q + Q2 + 40

(Note: The answer to this question must be hand-written.):

a) Find the equation of the marginal revenue curve corresponding to the market demand curve.

b) Find the equation for the marginal cost function.

c) Find the profit-maximizing quantity of output for the monopoly and the price the monopolist will set.

d) Calculate the monopolist’s profits.

e) Calculate the consumer surplus under monopoly.

f) What quantity of output would be produced if the monopolist acted like a perfect competitor and set MC equal to P?

g) Calculate the profits and consumer surplus corresponding to the competitive equilibrium.

h) Find the deadweight loss due to the monopoly

i. By illustrating it on a relatively accurate graph.

ii. By calculating it.