Market demand is given by Q=1200-50P Consider instead a monopoly market with only one firm. The...

Market demand is given by Q=1200-50P

Consider instead a monopoly market with only one firm. The firm’s marginal costs are given by MC=(1/150Q)+4.

What is the profit-maximizing output and price for this monopolist? Round your answer to the nearest integer.
Plot the marginal revenue curve, marginal cost curve in your graph and indicate the profit maximizing quantity and price for the monopolist.
Indicate the area of consumer surplus and the area producer surplus in your graph (no calculation is needed). Is this outcome efficient in comparison to the competitive outcome?

Solutions

Expert Solution

Q=1200-50P

P= 24-0.02Q

TR= 24Q-0.02Q^2

MR= 24-0.04Q

MC= (Q/150)+(4)

a. Monopolist produces at MC =MR.

24-0.04Q=(Q/150)+4

Output Q*= 428.5≈ 429

Price P*= 24-0.02*429= 15.4≈ 15

b. Point A is the profit maximising level.

c. No, this is not an efficient outcome as efficient outcome is at P=MC but monopolist produces at MC =MR.

Rahul Sunny answered 2 years ago

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