As the manager of a monopoly, you face potential government regulation. Your inv

Question

As the manager of a monopoly, you face potential government regulation. Your inverse demand is P = 30 - 2Q, and your costs are C(Q) = 10Q.

a. Determine the monopoly price and output.

Monopoly price: $_______
Monopoly output: ______ units


b. Determine the socially efficient price and output.

Socially efficient price: $_________
Socially efficient output: ________ units


c. What is the maximum amount your firm should be willing to spend on lobbying efforts to prevent the price from being regulated at the socially optimal level?

$_______________

Explanation / Answer

Ans)

a.
P=30-2Q
TR=PQ=(30-2Q)Q
Mr=dTR/dQ
Mr=30-4Q

C=10Q
MC=dTC/dQ
Mc=10

The monopolist produces where MC=MR
10=30-4Q
4Q=20
Q=5
P=30-2(5)=2

b.
For socially efficient Price and quantity P=Mc

30-2Q=10

2Q=20

Q=10

P=30-2(10)=10

c.

The firm should be willing to spend 10*10=100

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