3. Suppose firm F has the following marginal cost: MC = 2 + 6Q a. Suppose...

3. Suppose firm F has the following marginal cost: MC = 2 + 6Q

a. Suppose it is a Competitive Market and the equilibrium price p* = 26. How many units would F produce?

b. Now suppose it is a Monopolist market and the marginal revenue is given by MR = 102 - 4Q?

c. Theoretically, would you suppose the monopolist case would yield a higher price or lower than the competitive market?

Solutions

Expert Solution

a. In perfect competition P= MC

26= 2 + 6Q

Q= 4

b. For monopoly profit is maximized at MR=MC

102-4Q= 2+6Q

100= 10Q

Q= 10

P= 102-4*10= 80

c. The monopolist will charge higher price than competitive market because monopoly is the only firm in the market that makes it price maker.

Rahul Sunny answered 1 year ago

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