Week_6_practice_Vadim_Monopoly

Week_6_practice_Vadi - monopoly equals competitive consumer surplus Problem 2 1 A monopoly's economic profits are represented by a(price minus

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Problem 1. The demand curve for the product of a monopoly is P = 53 – Q . Marginal cost of production is $5 per unit. Find: a) Optimal output, price and profit of the firm. b) Price and equilibrium quantity in the case of perfect competition. c) CS in both cases. Solutions: a. P = 53 - Q PQ = 53 Q - Q 2 MR = 53 - 2 Q = MC = 5 Q = 24, P = 29, π = ( P - AC) Q = 576 b. MC = P = 5 P = 5, Q = 48 c. Competitive Consumers' Surplus = 2 (48) 2 = 1152. Under monopoly: Notice that the sum of consumer surplus, profits, and Deadweight loss under
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Unformatted text preview: monopoly equals competitive consumer surplus. Problem 2. 1. A monopoly's economic profits are represented by: a. (price minus marginal cost) times number of units sold b. (price minus average cost) times number of units sold c. (marginal revenue minus price ) times the number of units sold d. (marginal cost minus price) times the number of units sold Solution: b...
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This note was uploaded on 09/05/2011 for the course ECON 101 taught by Professor Buddin during the Fall '08 term at UCLA.

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