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the diagram below shows the demand, marginal revenue, and marginal cost of a monopolist.

Determine the profit-maximizing output and price. 

What price and output would prevail if this firm's product was sold by price-taking firms in a perfectly competitive market?

Calculate the deadweight loss of this monopoly.

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Darryn D'Souza
Darryn D'SouzaLv10
5 Sep 2020

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Related questions

The diagram below shows the demand, marginal revenue, and marginal cost of a monopolist.
a. Determine the profit-maximizing output and price.
b. What price and output would prevail if this firm's product was sold by price-taking firms in a perfectly competitive market?

Suppose a monopolist faces a demand curve for its output of P = 300−Q. This means that the marginal revenue curve of the monopolist is M R = 300 − 2Q. Assume that the marginal cost of production is constant and equal to $40.

a) Write down an expression for the monopolists profit, as a function of the quantity of output it produces.

b) If the monopolist must charge the same price for all units of output that it sells (that is, if the monopolist is a single price monopolist), what level of output will maximise the monopolists profit? What price will the monopolist charge? What is its level of profit?

c) If this were a competitive market instead of a monopoly, what level of output would be produced and what price would be charged? What is the level of profit for firms if it were perfectly competitive?

d) Draw a diagram of demand, marginal revenue, and marginal cost that illustrates your answer to part b). From this work out consumer surplus and producer surplus.

e) Draw the same diagram but for your answer to c), the case of the competitive market. From this work out consumer surplus and producer surplus. How much deadweight loss is there from the monopoly? Why?

Suppose a monopoly with a cost function of C(Q) = 4Q2 - 6Q + 200 faces a market demand of QD = 2,388 - 2P. A) Calculate the firm's total revenue, marginal revenue, and marginal cost. B) Calculate the profit-maximizing output and price. C) Over what range of prices is the demand for repairs inelastic? D) Why will the firm not produce a quantity at which the market demand is inelastic? E) Graph the demand, marginal revenue, and marginal cost curves for Wally's. On the graph, label the profit-maximizing level of output, price, consumer surplus, and deadweight loss.

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