Suppose the market for agricultural machinery, including crop sprayers, in a reg

Question

Suppose the market for agricultural machinery, including crop sprayers, in a region is monopolized by one company, Jack ReinDeere. The market demand for sprayers is given by Q = 1250 - 0.05P. The monopolist's supply curve for sprayers is given by Q = 0.1P.

a.Find the profit maximizing output and price level for this firm.

b.What would be the equilibrium price and output if this market was instead perfectly competitive?

c. Using a graph, calculate the deadweight loss from the monopolization of this market by Jack ReinDeere.

Explanation / Answer

demand function = P = 1250 / 0.05 - Q / 0.05

P = 25000 - 20 Q

Supply curve Q = 0.1 P

a. profit maximising output = 833.3

price = 8333.3

b. euilibirum output Q = 0.1* ( 25000-20Q ) = 833.3

equilibrium price = 8333.34

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.