Suppose that you are a monopoly faced with a demand curve given by Q=100-2P. You have...

 

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Suppose that you are a monopoly faced with a demand curve given by Q=100-2P. You have a constant marginal cost equal to $10. a) Calculate your optimal price and quantity. b) Show that your price adheres to the optimal markup rule based on demand elasticity. c) Explain why is the long-run equilibrium under perfect competition with identical firms different from the long-run equilibrium under monopolistic competition with identical firms? Is it possible for a monopolistic competitive firm to optimally produce at the minimum of its LRAC? d) What happens to the profit of a firm in monopolistically competitive market, if government sets a $5 per unit tax? Explain. Suppose that you are a monopoly faced with a demand curve given by Q=100-2P. You have a constant marginal cost equal to $10. a) Calculate your optimal price and quantity. b) Show that your price adheres to the optimal markup rule based on demand elasticity. c) Explain why is the long-run equilibrium under perfect competition with identical firms different from the long-run equilibrium under monopolistic competition with identical firms? Is it possible for a monopolistic competitive firm to optimally produce at the minimum of its LRAC? d) What happens to the profit of a firm in monopolistically competitive market, if government sets a $5 per unit tax? Explain.