A monopolist faces the following aggregate demand function: Q = 28 - 1/2 P. Total production costs for the firm are TC(Q) = 40Q. Calculate the consumer surplus, producer surplus, and profits in equilibrium. Then, suppose that the monopolist decides to spend 10 to purchase a patent that would allow her to decrease total costs by 4 per unit. Find the new equilibrium quantity, price, new consumer surplus, producer surplus, and profits to the monopolist after the purchase of the patent.
A monopolist faces the following aggregate demand function: Q = 28 - 1/2 P. Total production costs for the firm are TC(Q) = 40Q. Calculate the consumer surplus, producer surplus, and profits in equilibrium. Then, suppose that the monopolist decides to spend 10 to purchase a patent that would allow her to decrease total costs by 4 per unit. Find the new equilibrium quantity, price, new consumer surplus, producer surplus, and profits to the monopolist after the purchase of the patent.
Chapter8: Monopoly
Section: Chapter Questions
Problem 7SQP
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ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning