A monopolist faces the demand curve P =11 Q, where P is measured in dollars per...

A monopolist faces the demand curve P =11 Q,
where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $6 per unit.
Answer the following questions, showing all workings.
a) Calculate the monopolists profit-maximizing price and quantity. Calculate the
monopolists profit.

b) Draw the average and marginal revenue curves and the average and
marginal cost curves for the monopolist including the area of profits (label the diagram accurately showing prices and quantity, along with all curves for full marks).

c) A government regulatory agency sets a price ceiling of $7 per unit.
Calculate what quantity will be produced and explain why it will be produced at that quantity.

d) Using the new price ceiling and your quantity produced figures from
part c), calculate the new profit for the monopolist.

Expert Solution

Rahul Sunny answered 8 months ago

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