Suppose that a monopolist\'s market demand is given by P = 100-2Q( one hundred m

ID: 1187131 • Letter: S

Question

Suppose that a monopolist's market demand is given by P = 100-2Q( one hundred minus 2Q) and that marginal

cost is given by MC = Q=2.

a. Calculate the prot-maximizing monopoly price and quantity.

b. Calculate the price and quantity that arise under perfect competition with a market

supply curve P = Q=2.

c. Compare consumer and producer surplus under monopoly versus marginal cost pricing.

What is the deadweight loss due to monopoly?

d. Suppose market demand is instead given by P = 180 - 4Q(one hundred eighty minus 4Q). What is the deadweight loss

due to monopoly now? Explain why this deadweight loss diers from that in part (c). Hint:

think about elasticity of demand.

P = 100-2Q( one hundred minus 2Q) and that marginal

cost is given by MC = Q=2.

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