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# Tute 8answers - Introductory microeconomics ECON1001...

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Introductory microeconomics ECON1001 Semester 1 2010 Tutorial 8 Week 9 1. Using a diagram, show a monopolist’s profit, quantity and price and the resulting deadweight loss. Note – it is important that ATC is at its minimum when it intersects with the MC curve. 2. Let demand for a monopolist be Q = 10 – P, where y is the quantity demanded and P is the price. The monopolist has a constant marginal cost of MC = 4. (a) What is the monopolist’s marginal revenue? (b) What is the monopolist’s price and quantity supplied? What is the profit earned? (c) What is deadweight loss? (a) MR = 10 – 2Q (b) MC = 4 4 = 10 – 2Q Q = 3 and P = 10 – 3 = \$7 Note that Profit = TR – TC, since we do not know the TC function we can only work out that Profit = TR – VC - FC = 3*7 – 4*3 - FC = \$9 – FC Or Producer surplus = \$9 (c) Competitive output 4 = 10 – Q Q* = 6, P* = 4 and DWL = ½ (3)(3) = \$9/2 q P MC MR D ATC q max P max A monopolist’s profit ATC π

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3. The demand for good A is given by Q = 270 – P/2, where Q is market demand and P is the market price. B.I.G. Heavy Industries has successfully lobbied the
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