A monopolist faces the demand curve q 11

Economics

A monopolist faces the demand curve Q = 11 - P . The monopolist has a constant average (and marginal) cost of $6 per unit.

(a) Draw the average and marginal revenue curves and the average and marginal cost curves. What are the monopolist’s prot-maximizing price and quantity? What is the resulting prot? Calculate the firm’s degree of monopoly power using the Lerner index.

(b) A government regulatory agency sets a price ceiling of $7 per unit. What quantity will be produced, and what will the rms prot be? What happens to the degree of monopoly power? (c) What price ceiling yields the largest level of output? What is that level of output? What is the firm’s degree of monopoly power at this price?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91400269

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