{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

sol_even_10b - Chapter 10 Problem 8 8 , areasshown. , is

Info icon This preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
8) Serena is a single-price, profit maximizing monopolist in the sale of  her own patented perfume whose demand and marginal cost curves  are as shown. Relative to the consumer surplus that would result at  the socially optimal quantity and price, how much consumer surplus  is lost from her selling at the monopolistic profit-maximizing quantity  and price? Chapter 10, Problem 8
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
0 Ounces/day 24 $ per ounce 60 30 40 20 D MR MC 10 12 8
Image of page 2
0 Ounces/day 24 $ per ounce 60 30 40 20 D MR MC 10 12 8 Perfectly competitive output: P=MC Monopolistic output: P>MR=MC P Q Net Loss in consumer surplus Loss in producer surplus Transfer from CS to monopoly rent
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Perfectly competitive output: P=MR=MC 12 ounces, $30 each ounce Monopolistic output: P > MR=MC The firm still produce at MR=MC, but it charges a price higher  than MC 8 ounces, $40 each ounce Serena produces less than the perfectly competitive output Consumers loss due to the monopolistic price Loss in consumer surplus  = the area of the trapezoid between $30 and $40 = (8 +12) * ($40 - $30) *1/2 = $100
Image of page 4
However, part of loss in consumer surplus is actually transferred to  the monopoly rent That is the area of rectangle between $30 and $40
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern