h10 - The Colorado College Department of Economics and...

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1 The Colorado College Department of Economics and Business Block 7 Econ 207 HW 10. 1. A monopolist can produce at constant marginal and average costs of AC=MC=5. The firm has a market demand curve given by Q = 53 – P. (a) Derive the monopolist’s marginal revenue curve. Next calculate the profit maximizing price-quantity combination for the monopolist. Also calculate the monopolist’s profits and consumer surplus. (5 points) (b) What output level would be produced if the monopolist was forced to charge a perfectly competitive price? (2 points) (c) Graph the situation and show the area of the deadweight loss. What is the value of the “deadweight loss” from monopolization? (3 points) 2. (a) Suppose a monopolist has a monopoly on a game called monopoly and faces a demand curve given by: Q T = 100 – P and a marginal revenue function given by MR = 100 -2Q T where Q T equals the combined total number of games produced per hour of the company’s two factories (Q T = q 1 +q 2 ). If factory 1 has a marginal cost function
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This homework help was uploaded on 04/19/2008 for the course EC 207 taught by Professor Ghosh during the Spring '08 term at Colorado College.

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h10 - The Colorado College Department of Economics and...

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