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Suppose a monopolist has a constant marginal cost of $20 per unit, and a fixed cost of $100. The demand curve for the product of the monopolist is given by P=100-Q, and its corresponding marginal revenue is given by MR=100-2Q, where Q is the amount of sales.
What are the profit maximizing price, quantity
What is the maximum profit?
Suppose that the above monopoly market was once a perfectly competitive one before it suddenly become a monopoly. So the current monopolist demand, P=100-Q, was the industry demand under perfect competition, and the (constant) marginal cost of each firm was $20 under perfect competition.
What was the industry equilibrium price and output under perfect competition?
Calculate the deadweight-loss from monopoly and use graphs to demonstrate it.
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