1.If the monopolist\'s demand is given by P = 100 – Q, marginal revenue is given

Question

1.If the monopolist's demand is given by P = 100 – Q, marginal revenue is given by:
A) MR = 100 – 2Q.
B) MR = 100 – Q.
C) MR = 100Q.
D) MR = 100Q – Q2. 3. '

A monopolist sells in two different markets and charges the same price of $10 in both markets. In Market A, the demand curve is described by Qd = 50 – 2P. In Market B, the demand curve is described by Qd = 60 – P. If the monopolist lowers prices by $1 in the market with the more elastic demand and raises prices by $1 in the market with the more inelastic demand curve, by how much does its total revenue change?
A) –$27
B) $459
C) $767
D) $308

Rex Pharma produces anti-acid medication that is sold in a monopoly market. ' Rex Pharma sells 10,000,000 pills for $12.50 per pill. If the pills were sold for the marginal cost of production of $0.50, Rex Pharma would be able to sell 25,000,000 pills. What is the deadweight loss of this monopoly market?
A) $90,000,000
B) $120,000,000
C) $5,000,000
D) $12,500,000

Explanation / Answer

1. MR = 100 – 2Q

Explanation: P = 100 – Q

                   TR = P*Q = 100Q - Q2

MR is the first derivative of TR function

MR = 100 - 2Q

2. Ans: -$27

Explanation:

Market A:

Qd = 50 – 2P

if P = $10

Qd = 30

TR = P*Q = $10 * 30 = $300

Market B:

Qd = 60 – P

if P = $10

Qd = 50

TR = P*Q = $10 * 50 = $500

TR in both market = $300 + $500 = $800

If the monopolist lowers prices by $1

Then in market A : Qd = 50 - 2(9) = 32

TR = $9 * 32 = $288

If the monopolist raisess prices by $1

Then in market B : Qd = 60 - 11 = 49

TR = $11 * 49 = $539

So, TR in both market = $288 + $539 = $827

Thus the TR change = $800 - $827 = -$27

3. Ans: $90,000,000

Explanation:

DWL = [(25,000,000 - 10,000,000) * ($12.50 - $0.50)] / 2 = $90,000,000

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