Suppose that a monopolistic seller of designer handbags faces the following inverse demand curve: P=100-q. The seller can produce handbags for a constant marginal and average total cost of $20. a. Calculate the profit-maximizing price for this seller

Suppose that a monopolistic seller of designer handbags faces the following inverse demand curve: P=100-q. The seller can produce handbags for a constant marginal and average total cost of $20. a. Calculate the profit-maximizing price for this seller

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.3P

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Question

Suppose that a monopolistic seller of designer handbags faces the following inverse
demand curve: P 100-q. The seller can produce handbags for a constant marginal
and average total cost of $20.
Calculate the profit-maximizing price for this seller
Page
) Suppose the government levies a $6 tax per unit on sellers of
handbags. Calculate how this tax will affect the price the monopolist charges its
b.
customers.
Who bears the burden of this tax?

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