I am really struggling on the study guide for my exam tomorrow. Any help on how

ID: 1206740 • Letter: I

Question

I am really struggling on the study guide for my exam tomorrow. Any help on how to solve this problem would be greatly appreciated!

Your monopoly company exhibits the following costs:

TC=60+6Q+Q^2 & MC=6+2Q

And the following market demand and marginal revenue functions:

Qd=598-P; MR=598-2Q

a)Find the profit maximizing level of output for the monopoly

b) At what price does the monopolist sell its good?

c)What are the monopolist profits

d)Is there any dead weight loss in the market? If so what is it? Give a numerical answer

e)At this new government regulated price is the monopolist making profits? What are the profits/losses

a) At profit maximizing level MR equals MC,

equating MR and MC

598-2Q = 6+2Q

Q = 148 units.

thus level of output is 148 units.

b) Putting Q = 148 into demand,

148 = 598-P

P = $450.

seller will sell at $450 per unit.

c) Profit = tr - tc = P*Q - tc = 450*148 - 60 - 6(148) - (148)2 = $43748.

Part d and e can not be answered as new regulated price is not given in question.

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