Assume a monopolist faces a market demand curve P= 200 -4Q and has the short-run total...

Assume a monopolist faces a market demand curve P= 200 -4Q and has the short-run total cost function C= 480 + 40Q. What are the profit-maximizing price, quantity and profits? Graph the marginal revenue, marginal cost, and demand curves, and show the area that represents deadweight loss on the graph.

Solutions

Expert Solution

P=200-4Q

we know TR=P*Q

so TR = 200Q-4Q^2

MR = dTR/dQ = 200 - 8Q

C = 480+40Q

MC = dTC/dQ = 40

for equilibrium quantity

200-8Q = 40

8Q = 200-40 = 160

Q = 20

at Q= 20

P = 200-+4*20 = 120

Rahul Sunny answered 1 year ago

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