Illustrate what are the monopolist''s profit-maximizing

Illustrate what are the monopolist''s profit-maximizing price

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Reference no: EM1344820

In a competitive market, the industry demand and supply curves are P = 70 - QD and P = 40 - 2QS, respectively.

a. Find the market's equilibrium price and output.

b. Suppose that the government provides a subsidy to producers of $15 per unit of the good. Since the subsidy reduces each supplier's marginal cost by 15, the new supply curve is P = 25 + 2QS. Find the market's new equilibrium price and output. Provide an explanation for the change in price and quantity.

c. A public-interest group supports the subsidy, arguing that it helps consumers and producers alike. Economists oppose the subsidy, declaring that it leads to an inefficient level of output. In your opinion, which side is correct? Explain carefully.

Consider once again the microchip market described in Problem 9 of Chapter 7. Demand for microprocessors is given by P = 35 - 5Q, where Q is the quantity of microchips (in millions). The typical firm's total cost of producing a chip is Ci = 5qi, where qi is the output of firm i.

a. Assume that one company acquires all the suppliers in the industry and thereby creates a monopoly. Illustrate what are the monopolist's profit-maximizing price and total output?

Reference no: EM1344820

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