F C = 50 + 5

MC = ( + 1)Q

alpha = 6

beta = 5

where Q is the firms level of output. Questions

3). Monopoly Now suppose that your firm is operating as a monopolist in an industry where the demand curve is given by

Q d = A P

where A depends on your value of and can be found in the table below:

1 2 3 4 5 6 7 8 9 10

A 30 36 40 60 84 112 144 90 110 132

(a) Complete the table below for values of Q from 0 to 20, where PM is the monopoly price, T R is total revenue, AR is average revenue and MR is marginal revenue.

Q PM T R AR MR

0

1

2

.

.

.

19

20

(b) Produce a graph that shows the demand curve, the firms marginal revenue curve, and the firms marginal cost and average total cost curves that you found in question one.

(c) What is the profit maximizing level of output for your monopolist and how much profit does it make?

(d) Suppose your firm was run by a benevolent social planner. How much would it produce and what is the deadweight loss of monopoly in this industry. Illustrate this on your diagram.

solve for just 10