A monopolist is facing the following demand curve P = 50 − 5Q. The monopolist has...

A monopolist is facing the following demand curve P = 50 − 5Q. The monopolist has the following marginal cost MC = 10. The monopolist knows exactly the willingness to pay of each individual consumer and charge consumers individual prices. Calculate the monopolist’s profit (assuming FC=0).

(a) π=40
(b) π=80
(c) π = 160

(d) None of the above.

Solutions

Expert Solution

Answer
Monopolist charge price equal to the willingness to pay of the consumers, so the profit is equal to the consumer surplus at the output level of perfect competition
it produces at MC=P
50-5Q=10
5Q=40
Q=8
P=10
CS=0.5*(Y-axis intercept of the demand curve -P)*Q
=0.5*(50-10)*8
=160
the profit is $160
Option c

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

1. Consider two firms facing the demand curve P = 50 ? 5Q, where Q =...

1. Consider two firms facing the demand curve P = 50 ? 5Q, where Q = Q1 + Q2. The firms cost functions are C1(Q1) = 20 + 10Q1 and C2(Q2) = 20 + 10Q2. a. Suppose both firms have entered the industry. What is the joint profit-maximizing level of output? How much will each firm produce? How would your answer change if the firms have not yet entered the industry? b. How much should Firm 1 be willing to...

1. Consider two firms facing the demand curve P=50-5Q where Q = Q1 + Q2. The...

1. Consider two firms facing the demand curve P=50-5Q where Q = Q1 + Q2. The firms’ cost functions are C1(Q1) = 20+10Q1 and C2(Q2) = 10+12Q2. Suppose both firms entered the industry. a) What is the joint profit-maximizing level of output? b) What is total production (Q1+Q2) at the joint profit-maximizing level? c) What is firm 1's output if they behave non-cooperatively (Cournet Model)? d) What is firm 2's output if they behave non-cooperatively (Cournet Model)? e) How much...

Two firms face the following demand curve: P = 50 – 5Q, where Q = Q1...

Two firms face the following demand curve: P = 50 – 5Q, where Q = Q1 + Q2. The firms cost functions are C1 (Q1) = 20 + 10Q1 for firm 1 and C2 (Q2)= 10 + 12Q2 for firm 2. Suppose both firms have entered the industry. What is the joint profit maximizing level of output? [5Marks] What is each firms equilibrium output and profit if they behave non-cooperatively? Use the Cournot model. [5Marks] c. How much should Firm...

Suppose the demand curve for a monopolist is QD = 47,000 - 50 P, and the...

Suppose the demand curve for a monopolist is QD = 47,000 - 50 P, and the marginal revenue function is MR = 940 - 0.04Q. The monopolist's Marginal Cost = 40 + 0.02Q and its Total Cost = 250,000 + 40Q + 0.01Q2. a. Find the monopolist's profit-maximizing output and price. b. calculate the monopolist's profit/losses, if any. c. What is the Lerner Index for this industry at the monopolist's profit-maximizing output and price

suppose the a domestic monopolist has cost c= 50+.25q^2 .home demand is p = 100-.5q what...

suppose the a domestic monopolist has cost c= 50+.25q^2 .home demand is p = 100-.5q what is the monopolist level of outprice and profoits in xlosed economy suppose open for world a trade and world prive is 40 and domestic firm faces world market how much the country import and export fi d the consumer and producer surplus. with free trade comapre trade profit worh monopolist output which is higher explain

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a-...

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a- bq, and cost function C(q)= F + cq, where F denotes its fixed costs and c represents the monopolist's (constant) magical cost a>c 1. Graph demand, marginal revenue and marginal cost. Label your graph carefully, including intercepts 2. Solve the profit maximizing output q^m. To do this, first write down the expression for MR=MC and solve for the optimal quantity. Next find the price...

Suppose a monopolist facing a downward sloping inverse demand curve p(q) sets prices and quantity (p...

Suppose a monopolist facing a downward sloping inverse demand curve p(q) sets prices and quantity (p ∗ , q∗ ). Show that the area between the demand curve and the marginal revenue curve equals the consumer surplus.

Problem: The demand curve facing the monopolist has a constant elasticity of 2. (a) What will...

Problem: The demand curve facing the monopolist has a constant elasticity of 2. (a) What will be the monopolist’s markup on marginal cost? (b) The government is considering subsidizing the marginal costs of this monopolist. What level of subsidy should the government choose if it wants the monopolist to produce the socially optimal amount of output?

Suppose a monopolist faces a market demand curve Q = 50 - p. If marginal cost...

Suppose a monopolist faces a market demand curve Q = 50 - p. If marginal cost is constant and equal to zero, what is the magnitude of the welfare loss? If marginal cost increases to MC = 10, does welfare loss increase or decrease? Use a graph to explain your answer

A monopolist faces a market (inverse) demand curve P = 50 − Q . Its total...

A monopolist faces a market (inverse) demand curve P = 50 − Q . Its total cost is C = 100 + 10Q + Q2 . a. (1 point) What is the competitive equilibrium benchmark in this market? What profit does the firm earn if it produces at this point? b. (2 points) What is the monopoly equilibrium price and quantity? What profit does the firm earn if it produces at this point? c. (2 points) What is the deadweight...

Subjects