How would you find e and f? I already did a-d Consider a monopoly that faces a m
ID: 1200083 • Letter: H
Question
How would you find e and f? I already did a-d
Consider a monopoly that faces a market demand curve given as Q = 100 - P. The marginal cost of production for the monopolist is MC = $10. The monopolist faces total costs given by the following equation: TC = 10 + 10 Q. Write the demand equation in terms of Q. Suppose the monopolist charges a single-price for its product. What is the profit maximizing quantity and price for this single-price monopolist? Calculate the monopolist's total revenue (TR), total costs (TC) and total profits at this price. Suppose the monopolist charges two different prices: S80 and $55. How many units will the monopolist sell at P = $80? At P = $55? What are the total revenue (TR), total costs (TC) and total profits when the monopolist practices price discrimination? Compare these profits with lb. In words, explain what happens to consumer surplus when a monopolist charges different prices to different consumers?Explanation / Answer
e)
When the monopolist charges a price at $80, it will be able to sell 100 - P = 100 - 80 or 20 units. With 20 units, it can earn a total revenue TR amounting to $1600 while incurring a total cost TC of $210. Hence the profits are $1,390.
When the monopolist charges another price of $55, it will be able to sell 100 - P = 100 - 55 or 45 units. With 45 units, it can earn a total revenue TR amounting to $2,475 while incurring a total cost TC of $460. Hence the profits are $2,015. By discriminating price, it can earn a total profit of $3,405 which is more than the profit without discrimination by $1,390
f)
Consumer surplus falls as the monopolist charges different prices. Since consumer surplus exhibits the reservation price of each consumer group, a monopolist can exploit this by charging their reservation prices.
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