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Profit Calculation for Monopolist

- A monopolist faces a demand curve of Q = 75 – P/4 and the problem asks to find the equation of the marginal revenue curve (1 sentence) - The document contains 6 problems related to monopoly pricing and output decisions including calculations of profit-maximizing levels and effects of taxes (1 sentence) - The problems involve monopolist demand curves and calculations of optimal price and quantity given costs like average variable cost, total fixed cost, and marginal cost. Taxes are also analyzed in some problems to understand their impacts on monopoly equilibrium. (1 sentence)

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35 views2 pages

Profit Calculation for Monopolist

- A monopolist faces a demand curve of Q = 75 – P/4 and the problem asks to find the equation of the marginal revenue curve (1 sentence) - The document contains 6 problems related to monopoly pricing and output decisions including calculations of profit-maximizing levels and effects of taxes (1 sentence) - The problems involve monopolist demand curves and calculations of optimal price and quantity given costs like average variable cost, total fixed cost, and marginal cost. Taxes are also analyzed in some problems to understand their impacts on monopoly equilibrium. (1 sentence)

Uploaded by

Ryan
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Problem 1

• A monopolist faces a demand curve


• Q = 75 – P / 4
Monopoly Problems • Find the equation of the marginal revenue
curve

3.0 1

Problem 2 Problem 3

1) A monopolist with the demand curve P = A monopolist faces the demand curve P = 180 –
300 – 4 Q and AVC = 100, TFC = 50. What is Q, where Q is measured in thousands of
the profit-maximizing price and output?
pounds per year and P is measured in dollars
Calculate profit.
per pound. MC = $ 60 per pound.
2) If TFC = 2,600, what is the profit-
maximizing price and output? Calculate 1) Find the monopolist’s profit-maximizing
profit. price and quantity. What is the elasticity of
3) If AVC = 200 and TFC = 50, what is the demand at the profit-maximizing price?
profit-maximizing output?

2 3

Problem 3 Problem 4

2) Suppose MC = 0. Find the monopolist’s 1) The demand for food is QD ( P ) = 1 000 – 50


profit-maximizing price and quantity and the P. The long-run marginal and average total
price elasticity at that point? cost is $ 10 per unit. What is the equilibrium
price and quantity under competition and
under monopoly?

4 5

1
Problem 4
Problem 5
A monopolist faces a demand curve of
2) Now suppose a tax of $ 2 per unit is imposed (
P = 180 – Q and a constant marginal cost (MC) of
shifting the MC curve). What is the new
$60 per unit
equilibrium price and quantity under
a) Calculate and illustrate the deadweight loss
competition? Under monopoly? (DWL) due to monopoly
3) How much of a tax increase was passed on to b) Suppose the MC of production is given by
consumers under competition? Under MC = 60 + 2Q. Illustrate and explain the DWL
monopoly? from monopoly in this case of upward sloping
MC. Calculte the DWL

6 7

Problem 6
A monopolist has the total cost function C = 3Q2
and marginal cost is MC = 6Q. It faces the
demand curve P = 1200 – Q
a) What is the profit maximizing price and output?
What is total profit?
b) What will the monopolist do if it faces a lump-
sum tax of $50 000? Of $100 000?
c) What will the monopolist do if it must pay a tax
of $40 per unit sold? What are its profits now?

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