A monopolist has the following total cost function: C = 50 + 10Q + 0.5Q2 They...

A monopolist has the following total cost function:

C = 50 + 10Q + 0.5Q²

They face the market demand:

P = 210 – 2Q

a. What is the profit-maximizing price and quantity set by this monopoly? What is this monopolist’s profit?

b. Calculate the producer surplus, consumer surplus, and deadweight loss.

c. If the price elasticity of demand (ԑ) faced by this monopolist at the equilibrium is –1.625, what is the Lerner Index?

d. If the price elasticity of demand (ԑ) faced by this monopolist at the equilibrium is – 4, what is the Lerner Index?

e. Is the price markup charged by the monopolist higher in the part c scenario or in the part d scenario? Why?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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