How much profit will the monopolist make

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Reference no: EM13182370

Suppose a monopolist faces the following demand curve:

P = 596 - 6Q. Marginal cost of production is constant and equal to $20, and there are no fixed costs.

a) What is the monopolist's profit-maximizing level of output?

MR = (P-MC)*Q

MR = (596 - 6Q - 20)*Q

MR = (576 - 6Q)*Q

MR = 576 - 12Q = 0

Q* = 576/12

Q* = 48

The profit-maximizing level of output would be 48.

b) What price will the profit-maximizing monopolist charge?

P* = 596 - 6Q*

P* = 596 - 6*48

P* = 308

The profit maximizing monopolist price would be $308.

c)How much profit will the monopolist make if she maximizes her profit?

TR* = (P*-MC)*Q*

TR* = (308-20)*48

TR* = 13,824

d)What would be the value of consumer surplus if the market were perfectly competitive?

e) What is the value of the deadweight loss when the market is a monopoly?

Reference no: EM13182370

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