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Ray Atkinson
Ray Atkinson, Graduate Student
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Experience:  Inner-city high school substitute teacher. Degrees in mathemetics, accounting, and education. Years and years of tutoring.
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A monopolist faces a demand curve given by: P = 105 – 3Q,

Resolved Question:

A monopolist faces a demand curve given by:

P = 105 – 3Q, where P is the price of the good and Q is the quantity demanded. The marginal cost of production is constant and is equal to $15. There are no fixed costs of production.

A) (2 points) What quantity should the monopolist produce in order to maximize profit?

B) (2 points) What price should the monopolist charge in order to maximize profit?

C) (2 points) How much profit will the monopolist make?

D) (2 points) What is the deadweight loss created by this monopoly (hint: compare the monopoly outcome with the perfectly competitive outcome).

E) (2 points) If the market were perfectly competitive, what quantity would be produced?
Submitted: 5 years ago.
Category: Homework
Expert:  Ray Atkinson replied 5 years ago.

Ray Atkinson :

(A) 15 units gives the maximum profit. (B) The price is $60. (C) The revenue is 60*15-15*15=900-225=675
Under perfect competition, MR=MC, and MC=15, and MR=15 when Q=13, so that is the answer for (E)
Getting D is going to take me a little longer to compute.

Customer:

what's answer of D? Thank you.

Ray Atkinson :

I'm trying to get it. The formula is not working for me.

Customer:

Ok, take your time.

Ray Atkinson :

I am getting a deadweight loss of $12. (15-13)*(51-45) = 2*6 = 12

Ray Atkinson :

I just did the numbers again, and I get the same answer, so I am confident.

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