Question

Hi, Can anyone solve this question ?

Exercise 2: Monopoly Assume a monopoly market with a demand curve of Q(p) = 10 – p and marginal cost, which are constant at 4. a) What is the profit-maximizing monopoly price and output? Illustrate your answer in a graph! b) What is the price elasticity at the monopoly price and output? What are the effects if a social planer regulates the price?

Answer 1

& liven. 10-F Up) Mc = 4 A = 10 (all The is MR = MC The profit maximizing condition_undul mimoholy Marginal 1. Ma Revenu Marginal cost Total Repenua PX Q = buce X Quantity 10 - Al 108-02 TR - MR = d TR 1001 - 29 da MR = 10 - 20 4 at optimum 10 - 20 20 = 10-4 20. 6 $* 6 تن 2 8* = 3 F (0-3 = 1

Page No. 4 MC D MR 5 * The 3 Quantity Ikue prefit maximizing facice =] pecefit._ maximizing quantity (6) Price Plasticity of demand_whene_= 3 where a = 3 P = $7 Qon 10 - Ed da. O-1 - do ap Ed (1) X 1 - 2:33 -1 3 3 -2.33 louce elasticity of demand Negative ative sign. downward sloping demand wie social_flann Stegulated the pric the monopolist has sell where_Marginal cost_crise and demand intersat le. l = MC led Q onul to Cum consumor Siviplus MC 45 PR X AR

O Quantity under Regulated price Page Ne PR = brice undur brice Regulated > MC-4 . 10-4 Q 10- -) p = 10-B at of himnuun, 10-Q = 4 Q OR = 6 e=4 Under regulate price Total surplus Consumer Surplus t Producere Surplus as_Producul surplus 30 Total surplus Consumer Surplus Cory umor. Surplus. 1 (co-4X 6 X 2 L 2 6 X 6. = $18 X Total surplus $18 When there is no Price 10 regulation Consumer surplus Producer From_Diagram em m4S«հիման ։ swiple INA 4 + x(10-7) x 3 MC MR D 3 X Ix3x3 - 2 q 2 Quantity $4.5 Produur surplus (7-4) x3 Surplus $ 4.5 + $ 9 3x3 = $13:5 Total So, when frice is regulated Price falls, quantity increases and Total_sumibles is increased under regulated breasca