Question

In: Economics

A monopolist faces a demand curve of the form: P = 610 – 0.01Q. The total...

A monopolist faces a demand curve of the form: P = 610 – 0.01Q. The total cost for this monopolist is TC = 2,000,000 + 10Q. Assume there are no externalities of production or consumption of this monopolist’s product.

a) Suppose this monopolist cannot price discriminate. Explain why this monopolist will not produce an output greater than 30,000 units.

b) Draw a diagram to illustrate this monopolist’s situation. Show the demand, marginal revenue and marginal cost curves, and the profit maximizing price and quantity from part (a).

Solutions

Expert Solution

a)

Given

P=610-0.01Q

Total Revenue=TR=P*Q=610Q-0.01Q^2

Marginal Revenue=MR=dTR/dQ=610-0.02Q

Total Cost=TC=200000+10Q

Marginal Cost=MC=dTC/dQ=10

Set MR=MC for profit maximization

610-0.02Q=10

0.02Q=600

Q=30000 units

Profit maximizing output is 30000 units.

If monopolist produces more than 30000 units say 30001 units,

Marginal Revenue=MR=610-0.02*30001=9.98

It means that MR is less than MC at this output level. It shows that net addition to profit (MR-MC) will be negative on the production of 30001th unit. So, monopolist will not produce any output more than 30000.

b)

Q      MR MC P
0 610 10 610
10000 410 10 510
15000 310 10 460
20000 210 10 410
25000 110 10 360
30000 10 10 310
30500 0 10 305

Rahul Sunny answered 7 months ago
Next > < Previous

Related Solutions

A monopolist faces a demand curve of the form: P = 610 – 0.01Q. The total...
A monopolist faces a demand curve of the form: P = 610 – 0.01Q. The total cost for this monopolist is TC = 2,000,000 + 10Q. Assume there are no externalities of production or consumption of this monopolist’s product. a) Suppose this monopolist cannot price discriminate. Explain why this monopolist will not produce an output greater than 30,000 units.     b) Draw a diagram to illustrate this monopolist’s situation. Show the demand, marginal revenue and marginal cost curves, and the...
A monopolist faces the following average revenue (demand) curve: P = 100 – 0.01Q Where Q...
A monopolist faces the following average revenue (demand) curve: P = 100 – 0.01Q Where Q is weekly production and P is price, measured in cents per unit. The firm’s cost function is given by C = 50Q + 30,000. Assume that the firm maximizes profits. What is the level of production, price, and total profit per week? If the government decides to levy a tax of 10 cents per unit on this product, what will be the new level...
A monopolist faces a single market with the following demand curve and total cost P =...
A monopolist faces a single market with the following demand curve and total cost P = 180 – 2.5Q and TC = 2Q2 i. Determine the quantity of output that it should produce and the price it should charge to maximize profit. Then, calculate the profit.
a. Monopolist faces the following demand curve: P = 510 - 0.7Q; its total cost is...
a. Monopolist faces the following demand curve: P = 510 - 0.7Q; its total cost is given by: TC = 800 + 0.15Q Find marginal cost and marginal revenue b. Monopolist faces the following demand curve: P = 520 - 0.7Q; its total cost is given by: TC = 800 + 0.3Q Find marginal cost and marginal revenue
A monopolist faces the following demand curve: P = 400 - 3Q, its total cost is...
A monopolist faces the following demand curve: P = 400 - 3Q, its total cost is given by: TC = 3000 + Q2 and its marginal cost is given by: MC = 2Q. (a) If it is a single price monopolist, what is its profit maximizing price and quantity? Show your work. How much is the profit? How much are consumer surplus and producer surplus? (b) Suppose it is a first degree price discriminator instead of a single price monopolist....
A monopolist faces a market (inverse) demand curve P = 50 − Q . Its total...
A monopolist faces a market (inverse) demand curve P = 50 − Q . Its total cost is C = 100 + 10Q + Q2 . a. (1 point) What is the competitive equilibrium benchmark in this market? What profit does the firm earn if it produces at this point? b. (2 points) What is the monopoly equilibrium price and quantity? What profit does the firm earn if it produces at this point? c. (2 points) What is the deadweight...
A natural monopolist faces the following demand curve: P = 602 - 3Q, its total cost...
A natural monopolist faces the following demand curve: P = 602 - 3Q, its total cost is given by: TC = 5700 + 2Q (marginal cost is the slope of total cost). (a) If the government regulates the monopolist to charge a socially optimal price, what price will it charge and how many units will it sell? How much are the profit, consumer surplus and producer surplus? (1+2+2+2+1 = 8 points) (b) If it is not a regulated monopolist, what...
A monopolist faces a demand curve of Q = 164 – P, where P is price...
A monopolist faces a demand curve of Q = 164 – P, where P is price and Q is the output produced by the monopolist. What choice of output will maximize revenue? Group of answer choices 70 74 82 86 if monopolist produces good X and faces a demand curve X = 112 - 2P, where P is price. What is the monopolist's marginal revenue as a function of good X? Group of answer choices 44 - X 56 -...
consider a monopolist. Suppose the monopolist faces the following demand curve: P = 140 – 6Q....
consider a monopolist. Suppose the monopolist faces the following demand curve: P = 140 – 6Q. Marginal cost of production is constant and equal to $20, and there are no fixed costs. What is the monopolist’s profit maximizing level of output? What is the value of the deadweight loss created by this monopoly?
Assume a monopolist faces a market demand curve P= 200 -4Q and has the short-run total...
Assume a monopolist faces a market demand curve P= 200 -4Q and has the short-run total cost function C= 480 + 40Q. What are the profit-maximizing price, quantity and profits? Graph the marginal revenue, marginal cost, and demand curves, and show the area that represents deadweight loss on the graph.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT