Consider the monopolist with the function D(p) = 2000 - 4p and Marginal Cost = 10

a) In a graph with on the vertical axis and units of output on the horizontal, draw the market demand function and the monopolist’s marginal revenue and marginal cost curves. Show your calculations for the monopoly price and output.(2 points)

b)Use your graph in part a) to calculate Producer’s Surplus. Calculate the monopoly profits using the monopolist’s profit function and show that they are equal to producers’ surplus. (1 point)

c) Based on your answer in part c), what is the lowest payment the monopolist would accept to sell her output at the competitive price? (1 point)

d) What is the highest transfer the consumers would be willing to pay to the monopolist for her to sell output at the competitive price? (2 marks)

Answer rating: 100% (QA)

a Market demand function is Dp 2000 4p Marginal revenue curve is half the demand curve MRq 2000 8q M... View the full answer