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What is the firm optimal level of production

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Reference no: EM133133971

You are given with the information for a monopolist in the market. Let the market demand be shown as in the following table.

Price

Quantity

$20

0

$15

50

$10

100

$8

120

$6

140

$5

150

$4

160

In addition, let the marginal cost of the firm be $5 as a constant, the fixed cost be $60.

Answer the following questions:

  1. What is the firm's optimal level of production? What is the price that this monopolist will charge at this level of production?
  2. What is the shape of the firm's average total cost curve? What is the shape of the firm's average variable cost curve?
  3. Suppose the government imposes a price ceiling as $9.50 per unit of the product, what will be the possible response from this monopolist? What's the consumer surplus in this case?
  4. Compare to the full competition market what is the lost due to the monopoly?

Reference no: EM133133971

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