Profit maximization under monopoly

Reference no: EM1315753

Suppose a monopolist has be following total cost function: C = 10,000 + 2q, where MC = 2. The firm faces the following market demand curve: P = 10,002 - 4q.

a) What price will the monopolist charge and how much output will he produce? Sketch a diagram of this market and show the equilibrium price and quantity. In addition, calculate the firm's profits. (Show your work)

b) If the monopolist was regulated and required to charge the socially optimal price, what price would it charge and how much output would it produce? Would the firm be able to continue production at this price and quantity (analyze in terms of the shutdown condition)?

Reference no: EM1315753

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