Suppose a monopolist faces one market with the following demand curve: ?2(?2) = 1000 − 2?2...
Suppose a monopolist faces one market with the following demand curve:
?2(?2) = 1000 − 2?2
Let the marginal cost be $20 per unit.
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What is the firm’s optimal output? What is the profit-maximizing price?
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Suppose the government requires the monopolist to charge a price that is equal to the socially optimal price. What is this price? What is the socially optimal level of output?
Homework Answers
Socially optimal price:P=MC
500-(1/2Q2)=20
1/2Q2=480
Q2=960
P2=500-(1/2)*960
P2=20
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Suppose a monopolist faces one market with the following demand
curve:
?2(?2) = 1000 − 2?2...
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