Problem Set #9, 20 pts.
Competition and monopoly
Given the equation for total cost: C = 50Q
and the equation for demand: Q = 100 - .2P
4 pts. each maximum.
1. Find the profit-maximizing price and quantity for a monopoly.
2. At the profit-maximizing quantity, what is the monopoly profit?
3. If this industry had atomistic competition, what would be the price and quantity?
4. At the profit-maximizing quantity, what is the total revenue, total cost, and profit per firm if the industry has atomistic competition?
5. Under which market structure is there more economic well-being? Why?
Is there any policy implication in this?
Hint: work with the inverse demand.
Mathematical note: marginal revenue is the first derivative or slope of the total revenue curve.
The derivative of Q is 1. The derivative of Q squared is two times Q.