Compute consumer surplus and rm prots at competitive output

Reference no: EM13391881

A monopolist faces a market demand curve given by:

Q = 240 - P

and a cost function of

C (Q) = 10 + 40Q + Q2

(a) Find the prot maximizing quantity and price. Calculate the monopoly's prots and consumer surplus.

(b) What price and output level would have been produced by this industry under perfect competition (P = M C )? Calculate consumer surplus and rm prots at the competitive output level. Calculate the deadweight loss due to monopoly.

(c) Suppose the government wanted use a per-unit subsidy of $S to incentivize the monopolist at the competitive output level. What is the value of $S and how much would the total subsidy cost?

(d) Would you recommend for or against using the subsidy as an incentive to produce at the competitive level?

Reference no: EM13391881

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