A monopolistic seller sells the same good in 2 markets. The demands in the two m
ID: 1202002 • Letter: A
Question
A monopolistic seller sells the same good in 2 markets. The demands in the two markets areQ1= 100-p1. Q2=60-(1/2)p2 Marginal cost is 10
A) what is the deadweight loss and consumer surplus in each market A monopolistic seller sells the same good in 2 markets. The demands in the two markets are
Q1= 100-p1. Q2=60-(1/2)p2 Marginal cost is 10
A) what is the deadweight loss and consumer surplus in each market
Q1= 100-p1. Q2=60-(1/2)p2 Marginal cost is 10
A) what is the deadweight loss and consumer surplus in each market
Explanation / Answer
1) First Market:
Q = 100 - P
P = 100 -Q
MC= 10
Competitive equilibrium
P =MC
100 -Q =10
Q = 90
P =10
Monopolistic market:
MR=MC
TR = 100Q -Q^2
MR = 100 -2Q
MC=10
100 -2Q =10
2Q = 90
Q =90/2
=45
P =100-45
=55
Consumer surplus
CS = .5(100-55)(45)
=1012.5
DWL:
=.5(90-45)(55-10)
=1012.5
2)
1) second Market:
Q = 60-1/2P
P = 120 -2Q
MC= 10
Competitive equilibrium
P =MC
120-2Q =10
Q = 55
P =10
Monopolistic market:
MR=MC
TR = 120Q -2Q^2
MR = 120 -4Q
MC=10
120 -4Q =10
Q =27.5
P =65
Consumer surplus
CS = .5(120-65)(27.5)
=756.25
DWL:
=.5(55-27.5)(65--10)
=756.25
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