14. Consider a monopoly facing the following demand, marginal revenue, total cost, and marginal cost curves:...

14.
Consider a monopoly facing the following demand, marginal revenue, total cost, and marginal cost curves:

Demand curve: P = 12 – 0.002 Q

Marginal revenue curve: MR = 12 – 0.004 Q

Total cost curve: TC = 3Q +0.0005Q²

Marginal cost curve: MC = 3 + 0.001 Q

a. Calculate the profit maximizing output of this monopoly. Briefly explain your answer.

b. What is the socially efficient output level? Briefly explain your answer.

c. Suppose the government wants to adopt a price ceiling to induce this monopoly to produce at the socially efficient output level. Briefly explain what the level of this price ceiling should be and what will be the economic profit of this monopoly under this price ceiling.

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Rahul Sunny answered 1 month ago

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