A monopolist firm has the following cost function:

C(q)=0.5q^2 +10q+2

The (inverse) demand function for the monopolist’s output is as follows:

P(q) = 100 - q

a. Assume that the monopolist must charge the same price for all units of output (i.e. the monopolist cannot price discriminate). How many units of output will the monopolist produce to maximize profits? At what price will this output be sold? Illustrate this outcome in a graph.

b. How much profit does this monopolist earn?

c. Compute the own price elasticity of demand at the monopoly price and quantity. What is the value of the Lerner Index at the monopoly outcome?

Answer rating: 100% (QA)

C with price discrimination grou... View the full answer