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Economics

Suppose a monopolist faces a market demand given by the inverse demand function p = 10-q; and a total cost C(q) = 2q.

1.) what is the monopolist's optimal price and quantity? What is the total social surplus?

2.) Suppose the government subsidizes the monopolist by paying him 2 for every unit that the monopolist produces and sells. What pirce would be offered in the market? What would be the total social surplus?

3.) Consider another policy where the government could impose a price ceiling p on the monopolist. If the government were interested in maximizing social surplus, what would be the optimal value of p when considered from the point of view of the government? What would be hte total social surplus?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M9473016

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