Question

1. A monopolist can produce at constant average and marginal costs of AC = MC = 5. The firm faces a market demand curve given by Q = 53 - P. The monopolist's marginal revenue curve is given by MR = 53 - 2Q. a. Calculate the profit-maximizing price-quantity combination for the monopolist. Also calculate the monopolist's profits and consumer surplus. b. What output level would be produced by this industry under perfect competition (where price ¼ marginal cost)? c. Calculate the consumer surplus obtained by consumers in part b. Show that this exceeds the sum of the monopolist's profits and consumer surplus received in part a. What is the value of the ''deadweight loss'' from monopolization?

          1.	 A monopolist can produce at constant average and marginal costs of AC = MC = 5. The firm faces a market demand curve given by Q = 53 - P. The monopolist's marginal revenue curve is given by MR = 53 - 2Q.
a. Calculate the profit-maximizing price-quantity combination for the monopolist. Also calculate the monopolist's profits and consumer surplus.
b. What output level would be produced by this industry under perfect competition (where price ¼ marginal cost)?
c. Calculate the consumer surplus obtained by consumers in part b. Show that this exceeds the sum of the monopolist's profits and consumer surplus received in part a. What is the value of the ''deadweight loss'' from monopolization?

Added by Julia S.

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