4. Suppose a monopolist faces the following demand curve: P = 596 – 6Q. Marginal

Question

4. Suppose a monopolist faces the following demand curve:

P = 596 – 6Q. Marginal cost of production is constant and equal to $20, and there are no fixed costs.

a) (8 points) What is the monopolist’s profit-maximizing level of output?

b) (8 points) What price will the profit-maximizing monopolist charge?

c) (8 points) How much profit will the monopolist make if she maximizes her profit?

d) (8 points) What would be the value of consumer surplus if the market were perfectly competitive?

e) (8 points) What is the value of the deadweight loss when the market is a monopoly?

Explanation / Answer

a) (8 points) What is the monopolist

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