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The monopoly's demand is p(y) = 850-2y. The cost of production is c(y) = 50y. From the MR and MC of these, I got the optimal output of y=200 units and P=$450.

The part I was having trouble with was the following:

"Suppose in addition to the costs provided, the ?rm also has a ?xed cost of $130,000. The ?xed cost is not sunk in the long run.

  • How does the presence of the ?xed cost change your answer to the optimal output of this monopolist? Speci?cally, will the ?rm produce output in this market (long run)?
  • Is it socially optimal to produce this good? That is, determine the effcient level of output. Is it zero (i.e. should the good be produced, and if so, how much?)?"

Business Management, Management Studies

  • Category:- Business Management
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