In: Economics
. A monopolist has a cost function given by c(y) = 0.5y 2 and faces a demand curve given by P(y) = 120 − y.
What is its profit-maximizing level of output? What price will the monopolist charge?
• If you put a lump sum tax of $100 on this monopolist, what would its output be?
• If you wanted to choose a price ceiling for this monopolist so as to maximize consumer plus producer surplus, what price ceiling should you choose?
• Suppose that you put a specific tax on the monopolist of $10 per unit output. What would its profit-maximizing level of output be?