Graph this situation, then calculate the monopolist's profit-maximizing price-quantity and the monopolist's profits.   What output level would be produced by a corresponding perfectly competitive industry? What would be the price level?  Calculate the "deadweight losses" from monopolization of the industry.   Show the DWL on the graph.

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 15CQ
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A monopolist can produce at constant average total and marginal cost of ATC = MC = $20. (Constant ATC = MC implies that there are no fixed costs.) The firm faces a market demand curve given by QD = 40 - P. The monopolist's marginal revenue curve is given by MR = 40 - 2QD.

Graph this situation, then calculate the monopolist's profit-maximizing price-quantity and the monopolist's profits.   What output level would be produced by a corresponding perfectly competitive industry? What would be the price level?  Calculate the "deadweight losses" from monopolization of the industry.   Show the DWL on the graph.

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