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Unformatted text preview: exactly that much. iii) How much profit does each firm make? Profit = TR- TC Profit = P*Q [(Q^2)+50] P=50, Q=25 and substitute into above equation. iv) What is the value of the consumer and producer surpluses in this equilibrium? CS=(100-50)*(50)/2 = (50^2)/2 ; PS = (50)(50)/2 = (50^2)/2 2. Now suppose that the rest of the producers leave the market so that only one is left to monopolize the market. The market demand curve is the same as in #1. i) What is the marginal revenue function? MR=100-2Q ii) What how many units will the monopoly sell? What price will they charge? Set MR=MC 100-2Q=2Q Q=25. If Q=25, then P=100-Q=100-25=75. iii) How much profit will the monopoly make? What is the new consumer surplus? Profit = TR- TC Profit = P*Q [(Q^2)+50] P=75, Q=25 and substitute into above equation. CS=(100-75)*(25)/2 = (25^2)/2 iv) What is the deadweight loss due to monopolization? DWL= (75-50)(50-25)/2= (25^2)/2...
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- Winter '09