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| Suppose that a monopolist’s market demand is given by P = 100 – 2Q and that marginal cost is given by MC = Q/2. a) Calculate the profit-maximizing monopoly price and quantity. b) Calculate the price and quantity that arise under perfect competition with a supply curve P = Q/2. c) Compare consumer and producer surplus under monopoly versus marginal cost pricing. What is the deadweight loss due to monopoly? d) Suppose market demand is given by P = 180 – 4Q. What is the deadweight loss due to monopoly now? Explain why this deadweight loss differs from that in part (c). |
