Consider a monopolist facing a constant marginal cost of MC = $10 per unit and a...

Consider a monopolist facing a constant marginal cost of MC = $10 per unit and a demand curve of P = 200 – 2q for each individual consumer.

If the monopolist has zero fixed costs, what are its profit and the resulting deadweight loss? How does your answer change if the monopolist also has a fixed cost of $4000?

b. Now the monopolist faces a potential competitor. If the consumer switches to buy the product from the entrant the consumer will receive consumer surplus (net of the price they pay for the good) of $4025. What should the monopolist do now?

Expert Solution

SOLUTION:-

Rahul Sunny answered 2 years ago

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