Question

Suppose a monopolist faces consumer demand given by P 600 1Q with a constant marginal cost of $60 per unit (where marginal cost equals average total cost. asssume the firm has no fixed costs). If the monopoly can only charge a single price, then it will earn profits of S(Enter your response rounded as a whole number.) Correspondingly, consumer surplus is S However, if the firm were to practice price discrimination such that consumer surplus becomes profit, then, holding output constant at 270, the monopoly would have profits of S

Answer 1

du a monopoly always MR e MC TR2 PXQ (600 - 1Q) Q = 600Q -Q² MR ITR 600-2Q Nowo, equating to the MC, as given MC 2 860, 600- 2Q 260 =) 2Q 2 600 - 60 2) Q = 270 Therefore putting the value of Q in the equation, P2600 - 1x270 P2330 We know, Profit TR-TC As, the marginal cost is constant and no fined Cost is there. So, ATC 860 Profit 2 (P-ATC)Q = (330-60)* 270 $72,900] The consumer surplus is the area above price and it also comes below the demand curve. So, Consumer Suoples a 1 x (600-330) x 2 to - 1736,450 The profit after poice discrimination is followed When Q2 250 Then Profit & Profit at single monopoly Consumer surplus 2 (42900 + 36450) = $ 1,09,350

the answers are:

$72900

$36450

$109350