Calculating a Monopolist’s Consumer and Producer Surplus
1. A monopolist faces demand given by: P=100-4Q and has
marginal costs given by: MC=10+2Q
a. Draw the demand, marginal revenue and marginal cost
curves. Calculate and show how much this firm will sell and what it will
charge.
b. Calculate the producer surplus with monopoly and the
consumer surplus with monopoly.
c. How much would be produced if this were a competitive
market? What would be the price?
d. Calculate the consumer and producer surplus for a
competitive market.
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