Suppose a monopoly has constant marginal costs of $20 per unit. Demand for the monopolist’s product...

Suppose a monopoly has constant marginal costs of $20 per unit. Demand for the monopolist’s product is Q = 100 - P. Please show the work to receive the full credit.

i. What are the profit maximizing price and quantity for this monopoly?

ii. How many units of the product would the competitive market supply? What would the equilibrium price be?

iii. Calculate how much consumer surplus would be lost if this market started off as perfectly competitive but then became monopolistic.

iv. Calculate how much producer surplus would be gained if this market started off as perfectly competitive but then became monopolistic.

Expert Solution

Rahul Sunny answered 2 years ago

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