1.Suppose a monopolist faces the demand curve P = 153 - 1Q. The monopolist\'s ma
ID: 1102935 • Letter: 1
Question
1.Suppose a monopolist faces the demand curve P = 153 - 1Q. The monopolist's marginal costs are a constant $16 and they have fixed costs equal to $146. Given this information, what will the profit-maximizing price be for this monopolist?
Round your answer to two decimal places. Do not use a $ sign.
2. Suppose a monopolist faces the demand curve P = 195 - 1Q. The monopolist's marginal costs are a constant $32 and they have fixed costs equal to $58. Given this information, what are the maximum profits this firm can earn?
Round your answer to two decimal places. Do not use a $ sign.
3. Suppose a monopolist faces the demand curve P = 187 - 4Q. The monopolist's marginal costs are a constant $27 and they have fixed costs equal to $69. Given this information, if the firm maximizes their profits, what would be size of the deadweight loss in this market?
Round your answer to two decimal places. Do not use a $ sign.
Explanation / Answer
1. P = 153 - 1Q
TR = P*Q = 153 Q - 1Q2
MR = dTR/dQ = 153 - 2Q
MC = 16
TC = FC + MC*Q = 146 + 16Q
Profit maximises at equilibrum where MC = MR
153 - 2Q = 16
2Q = 137
Q = 68.5
P = 153 - 68.5 = 84.5
2. P = 195 - 1Q.
TR = 195Q - 1Q2
MR = 195 - 2Q.
MC = 32
At equilibrium, 195 - 2Q = 32
2Q = 163
Q = 81.5
P = 195 - 81.5 = 113.5
TR = 113.5 * 81.5 = 9250.25
TC = 58 + 32Q
TC = 58 + 32 * 81.5
TC = 2666
Profit = TR - TC
Profit = 6584.25
3. P = 187 - 4Q
TR = 187Q - 4 Q2
MR = 187 - 8Q
MC = 27
AT equilibrium, 187 - 8Q = 27
8Q = 160
Qm = 20
P = 187 - 4* 20
Pm = 107
Takinh this case as under perfect competition, P = MR
SO putting, P = MC under equilibirum condition, 187 - 4Q = 27
4Q = 160
Q = 40
P = 187 - 4*40
P = 27
Dead weight Loss = 1/2 x (DIfference in price) x (Difference in Qunatity)
DWL = 1/2 x 107 - 27) x (40 - 20)
DWL = 1/2 x 80 x 20
DWL = 800
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