Question: A firm with market power faces the demand function q = 4,000 - 40P. The firm's total cost function is TC(q) = 10q + 0.001q2

A firm with market power faces the demand function q = 4,000 - 40P. The firm's total cost function is TC(q) = 10q + 0.001q2 + 1,000.
a. If the firm behaves as a single-price monopoly, identify the firm's optimal price and output level.
b. Demonstrate that the single-price monopolist's profit-maximizing choice of price and output also maximizes producer surplus.
c. Identify the output level that would maximize total surplus.
d. Identify the output level that a perfect price-discriminating monopolist would produce.

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a Rearranging the firms demand function to identify the inverse demand function we have P 100 0025q The firms profit function is 100q 0025q 2 10q 0001... View full answer

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