Calculate rms degree of monopoly power using lerner ondex

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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 monopolists profit-maximizing price and quantity? What is the resulting prot? Calculate the rms 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 firms degree of monopoly power at this price?

Reference no: EM13818487

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