Problem Set #9, 20 pts.

Dr. Foldvary

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.