Price Quantity Price Quantity $10 0 $4 6 $9 1 $3 7 $8 2 $2 8 $7 3 $1 9 $6 4 $0 1

Question

Price            Quantity             Price             Quantity
$10                 0                      $4                     6
$9                   1                      $3                     7
$8                   2                      $2                     8
$7                   3                      $1                     9
$6                   4                      $0                    10
$5                   5                        

what price and quantity will the monopolist produce at if marginalcost is a constant $4

calculate the deadweight loss from having the monopolist producerather than a perfect competitor.

Explanation / Answer

First calculate the marginal revenue for different quantities: Quantity   MR 1             9 2             7 3             5 4             3 5             1 ...additional quantities result in negative marginal revenues. The monopolist will produce 3 units at $5 each, because this is thelast number which is greater than $4. In perfect competition, the price would equal marginal cost, andthus 6 units would sold. The difference is 4*6 - 5*3 = 9

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