Use a cell reference or a single formula where appropriate in order to receive full credit. Do not copy and paste values or type values, as you will not receive full credit for your answers. A monopoly faces the demand function Q = 30 – p. Its inverse demand function is therefore p = 30 – Q, so its marginal revenue function is MR = 30 – 2Q. The firm’s cost function is C = 6Q + Q2, so its marginal cost is MC = 6 + 2Q. The monopoly sets its price. Its quantity is determined by the demand function.
	Q	=	30	-	p
	p	=	30	-	Q
	MR	=	30	-	2	Q
	C	=	6	Q  +	Q2
	MC	=	6	+	2	Q
a)	Calculate the output, revenues, costs, profits, marginal revenues, and marginal costs for p =15, 16, 17, …, 30. Determine the price that maximizes profit and verify that MR = MC at this price. Determine the price that maximizes total surplus and verify that p = MC at this price.
b)	Calculate the consumer surplus and total surplus in your spreadsheet. The formula for consumer surplus is CS = 0.5(30 – p)Q. The firm’s producer surplus equals its profit because it has no fixed cost. Total surplus is the sum of the consumer surplus and the producer surplus. If the profit-maximizing monopoly price is charged instead of the price that maximizes total surplus, what is the deadweight loss?
	CS	=	0.5	(	30	-	p)Q
		a)						b)
	p	Q	R	C	Profit	MR	MC	CS	TS
	$15	15	$225	$315	-$90	$0	$36	######	$23
	$16	14	$224	$280	-$56	$2	$34	$98.00	$42
	$17	13	$221	$247	-$26	$4	$32	$84.50	$59
	$18	12	$216	$216	$0	$4	$30	$72.00	$72
	$19	11	$209	$187	$22	$8	$28	$60.50	$83
	$20	10	$200	$160	$40	$10	$26	$50.00	$90
	$21	9	$189	$135	$54	$12	$24	$40.50	$95
	$22	9	$198	$135	$63	$12	$24	$36.00	$99
	$23	7	$161	$91	$70	$16	$20	$24.50	$95
	$24	6	$144	$72	$72	$18	$18	$18.00	$90
	$25	5	$125	$55	$70	$20	$16	$12.50	$83
	$26	4	$104	$40	$64	$22	$14	$8.00	$72
	$27	3	$81	$27	$54	$24	$12	$4.50	$59
	$28	2	$56	$16	$40	$26	$10	$2.00	$42
	$29	1	$29	$7	$22	$28	$8	$0.50	$23
	$30	0	$0	$0	$0	$30	$6	$0.00	$0
	The maximum profit is			$72	when the price is		$24	. (Verify that MR=MC)
The maximum total surplus is				$99	when the price is		$22	. (Verify that P=MC)
b)	The deadweight loss is			$	.

Answer rating: 100% (QA)

a The output Q has been found by substituting each of the prices p to the equation Q 30p Likewise th... View the full answer