QUESTION 1 0

QUESTION 1 Assume that a monopolist sells a product with a total cost function: 1,200 + 0.5Q2. The market demand curve is given by the equation: For what range of output will the firm's revenue be increasing? O < Q < 150 v Q: 100 150 For this monopolist, the profit-maximizing price is $200 At this price, the monopoly will earn profit equal to $13,800 v , at which it will sell If this market were supplied by many firms with the same cost function, how much would be produced? v units of output. At what price would it be sold? $150 Calculate the loss in efficiency in this market due to the monopoly. QUESTION 2 A monopolist has set her level Of output to maximize profit. The firm's marginal revenue is $20, and the price elasticity Of demand is -2.0. The firm's profit maximizing price is approximately v . The Lemer index Of monopoly power is 1 40 In a perfectly competitive market, the Lemer index is O QUESTION 3 Consider a monopolist facing a downward-sloping demand curve. Marginal revenue is located Compared to a competitive market, a mQnQpQlisLsells a lower If, at the current level Of output, a monopolist determines that the elasticity Of demand is -O. 15, then the monopolist will earn more money by decreasing output Compared to a competitive market, a monopsonistbuysa lower 150 '50