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In: Economics

Suppose that a price-searcher monopolist had a total cost function given by: TC= 20 + 0.5Q...

Suppose that a price-searcher monopolist had a total cost function given by: TC= 20 + 0.5Q +0.2Q2. The demand for the price searcher's product is given by: QD= 100 -20P. Calculate the monopolist's producer surplus.

Solutions

Expert Solution

The marginal cost would be or or . The inverse demand would be . The total revenue would be or or . The marginal revenue would be or or .

The profit maximizing output would be where the MC is equal to the MR, ie or or or . The corresponding price would be .

The PS would be the total revenue of the firm minus the area below the marginal cost curve (the variable cost). The total revenue of the firm would be dollars. The area below the marginal cost curve would be or or or or or dollars. The producer surplus would hence be dollars.

The graph is as below.

Rahul Sunny answered 1 year ago

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