Question

Suppose a monopolist faces consumer demand given by P 400-5Q with a constant marginal cost of $20 per unit (where marginal cost equals average total cost. assume 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 38, the monopoly would have profits of S

Answer 1

# P2 400-50 Mo (Marginel Cort) a $20 Tatal Revenue (TR) . Pro (400-5Q) Q TR = 4000-58² Marginal Revenue (MR) 2 dor) da d [ 400 Q - 54²] MR 2 400-10Q In case of Monopoly (Single Price), optimize profit Maximization output can be given big point where MR = MC 400-10Q2 20 10 Q2 380 Q. 38 Pa 400 - (5 x 38) [p = 210 Scanned with CamScanner

Profit 2 Revenue - Cart PXQ - cart 2 210838 - 20838 [ Profit - 7220 210C B C D To-MC220 HR 38 40 - Demand, 80 Quantity Consumer Suplus! Consumer Suples can be given ley area below demand blue and above price level. So consemen Seuples gi - Area (A ABC) ? * * (400 -210) X 38 I consumer Seuples 2 3610 Scanned with CamScanner

Now Consumer practic Price discrimination. So tente Total Revenue 2 Conime Serplus 2 3610 st Profil - Totel Revenue - Cart 2 3610 - 520038 [Profil - 2850 single price, then it If Yonepoly will earn practica can only charge a profit of $17220 36107 >> Corresponding, conuumu Seeples is $ However, if the firm were to practice price discimmetion such that consumer seuplus becomes profit then holding output at 38, the Monopoly would have Profil of $12850] Scanned with