Assume a monopolist faces a market demand curve P = 190 - 3Q and has the...

Assume a monopolist faces a market demand curve P = 190 - 3Q and has the short-run total cost function C = 540 + 10Q. What is the profit-maximizing level of output? What are profits? Graph the marginal revenue, marginal cost, and demand curves, and show the area that represents deadweight loss on the graph. (Hint: derive the MR and MC functions and set MC=MR and solve).

In Question 3 above, what would price and output be if the firm priced at socially efficient (competitive) levels? What is the magnitude of the deadweight loss caused by monopoly pricing?

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Rahul Sunny answered 1 year ago

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