Monopoly, Economics A monopolist produces a commodity for which the demand curve

Question

Monopoly, Economics

A monopolist produces a commodity for which the demand curve is given by p(Qs) = 25 - 0.25QS (remember that we can also write the demand curve in this form), where Qs is the quantity supplied of the commodity. This causes the monopolist's marginal revenue curve to be MR(QS) = 25 - 0.5QS when it supplies Qs units of the commodity. The monopolist's marginal cost of production is constant at $15 for each extra unit produced. What is the profit-maximizing quantity supplied by the monopolist, Qs? What is the efficient quantity supplied, Qe? What is the value of the deadweight loss? At what level must be a ceiling price imposed upon the monopolist's market to cause the monopolist to supply the efficient quantity supplied? (Hint: draw a picture to help yourself).

Explanation / Answer

for profit maximising condition, MR=MC

=>25-0.25Q=15

=>Q=40

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