Calculating optimal output price and consumer

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Reference no: EM13369257

Calculating optimal output, price and consumer expenditure

Suppose a perfectly competitive industry cab produce roman candles at a constant marginal cost of $10 per unit. Once the industry is monopolized, marginal costs rise to $12 per candle because $2 per candle must be paid to lobbyists to ensure that only this firm receives a roman candle license. Suppose the market demand for roman candles is given by Qd = 1,000 - 50P and marginal revenue MR = 20 - Q/25.

a) Calculate the perfectly competitive and monopoly price and output.

b) What is the total consumer expenditures on this product under monopoly and under perfect competition?

Reference no: EM13369257

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