Question

Question Pricel and sesl per un MC ogLeo P. H Demand MA Quantity What is the profit-maximizing quantity for this monopolist and what is the price they will charge? (1 point) What is the consumer surplus in this monopoly (you can use the letters)? (0.5 points) The gain in producer surplus in this monopoly market is represented by the area (0.5 points) (Use the letters) The deadweight loss in this monopoly is represented by the area points) (use letters) If this were a perfect competition instead, what would areas would represent consumer and producer surplus (1 point) (0.5 If this were a perfect competition instead, what is deadweight loss equal to? (0.5 points) 2

Answer 1

a.

A monopolist firm profit-maximizing condition is

MR=MC

Corresponding to this condition quantity Q1 is determined and corresponding to this quantity on the demand curve, price will be determined.

Hence price is P1 and Quantity is Q1.

b.

Consumer surplus is the area below the demand curve and above price P1.

Consumer surplus is=area of triangle (P0FP1)

c.

Gain in the producer surplus is the area of rectangle (P2P3HG).

d.

Dead weight loss is represented by the area(FHE).

e.

Perfectly competitive profit-maximizing condition is

P=MC

So in this case

CS is area (P0P2E).

Producer surplus is area(P2E).

f.

Since in perfect competition efficient quantity is produced, so there will be no DWL.

DWL=0