Consider a monopolist facing a linear inverse demand curve p(q)-a-bq, and cost function C(q) = F...

 

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Consider a monopolist facing a linear inverse demand curve p(q)-a-bq, and cost function C(q) = F + cq, where F denotes its fixed costs and c represents the monopolist's (constant) marginal cost and a>c. a. Find the monopolist's profit-maximizing output q". Given output q", what is the market price? b. Find the socially optimal output level, q*. Is it larger or smaller than the profit- maximizing output, q", that you found in part a? Consider a monopolist facing a linear inverse demand curve p(q)-a-bq, and cost function C(q) = F + cq, where F denotes its fixed costs and c represents the monopolist's (constant) marginal cost and a>c. a. Find the monopolist's profit-maximizing output q". Given output q", what is the market price? b. Find the socially optimal output level, q*. Is it larger or smaller than the profit- maximizing output, q", that you found in part a?

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Answer For a monopoly profit is maximized at MR MC P a bq TR Pq aq bq MR ... View the full answer